Looking for ICHRA rules, ICHRA regulations or ICHRA requirements? The tax-advantaged benefits of the Individual Coverage HRA (ICHRA) have been available since January 1, 2020. Our team sees this HRA option as a game changer for companies that traditionally offer group plans to their employees. It gives employers flexibility to scale benefits, control costs, and make the design work for their unique staffing situation. Here's what to know about ICHRA rules.
Before we dive in, let's all take a moment to go over what an ICHRA actually is. An Individual Coverage HRA is a tax-advantaged solution that allows a company of any size to reimburse employees for individual health plan premiums and ICHRA qualified medical expenses.
It works like this: the employer designs their HRA and determines the amount to reimburse on a monthly basis to different classes of employees, say $200 a month for a their part-time team, $400 a month for remote employees, and a traditional group plan for the full-time team. Employees would then submit proof of an expense for reimbursement and get paid back.
This transaction is tax-free, meaning that employers don't get dinged for payroll tax on the amount and the employees don't have to recognize the reimbursements as income.
The biggest benefit of all is that with ICHRA plan, employers can scale their benefits based on employee classes and employees can choose the best plan that works for them.
A quick recap of all the ICHRA benefits:
This is the opposite of one-size-fits-all. And it's positioned to completely rewrite the way companies offer health benefits to their staff.
The final rules for the Individual Coverage HRA were announced June 13, 2019 from the U.S. Departments of Treasury, Health and Human Services, and Labor. The rules expand upon the executive order from President Trump last fall which instructed the U.S. Departments of the Treasury, Health and Human Services, and Labor to expand the usability of HRAs. This was the third step the President has used to reform healthcare policy through regulatory changes. ICHRA rules can change so it's always important to have a well-informed ICHRA administrator on your side (like us!).
Recent HRA research has shown that since its inception, ICHRA has seen triple digit growth, according to the HRA Council.
See if your location is prime to save with ICHRA with our HRA Heatmap!
Here's the complete list of ICHRA rules and requirements.
→ Learn more about how ICHRA affects premium tax credits.
→ Learn more about ICHRA eligibility rules.
→ Check out our ICHRA plan document template!
Here are a few important ICHRA requirements to remember for the Individual Coverage HRA.
Good news, everyone! The individual coverage HRA is a scalable benefit, available for businesses of all sizes (unlike its predecessor, the QSEHRA, which is only for companies of less than 50).
This means that a five-person startup, a mid-sized 50-person team, or a 500-person corporation can all sign up for an individual coverage health reimbursement arrangement.
More good news. There is no limit on what you can contribute to an ICHRA. The sky’s the limit for this tax-friendly alternative to traditional group plans.
ICHRA classes, one of our favorite things about this new type of HRA, allows employers to scale benefits across different types of employees. That means everyone doesn’t have to be treated fairly across the board and you can concentrate your benefits dollars on the employees who matter most. Within each class (like part time, salary, remote, etc), employees have to be treated equally.
Any member of the team is eligible to participate in ICHRA, but for employees to be ICHRA compliant and receive reimbursements, two boxes must be checked when it comes to whether or not their health plan will integrate with ICHRA.
First, they must be covered by a qualified individual health plan, meaning that the plan has no annual or lifetime limits (PHS 2711) and covers preventive health services with no cost sharing (PHS 2713).
Plans that jive with the individual coverage requirements include individual major medical plans found on or off the exchange, catastrophic plans (limited to those under 30 or those who qualify for a hardship exemption), Medicare parts A or B+C, and student health insurance.
While employees will have many options on the individual market, the rules do not apply for employees seeking coverage on a spouse’s employer-based plan. We think this is a bummer, but it’s an important individual coverage requirement to know.
In addition, we know there are a lot of alternative plans on the market now based on short-term plans, fixed indemnity plans, and sharing ministries. Although these alternative plans may provide great coverage, they will not work with ICHRA.
If an employee doesn’t have a plan, no worries! Being eligible for ICHRA means that you have a special enrollment period to find a plan that works for you.
→ Learn more about how ICHRA affects premium tax credits.
Setting up an ICHRA is not rocket science, but ICHRA administration does require some important components:
If this seems overwhelming to you, remember that if you have an ICHRA Administration software like Take Command, we'll do all the heavy lifting for you.
Take Command is a recognized leader in HRA administration and small business HRA tax strategy. We were at the forefront of the new ICHRA administration regulations and responded with our own comprehensive and exclusive research to the proposed regulations. We are also a founding member of the HRA Council.
We were the only HRA provider invited to Washington when the new regulations were passed and are the only HRA administrator to offer personalized, hands-on enrollment support for employees.
Our team is passionate about HRAs and the impact they can have on a business.
Chat with our team of HRA administrators with any questions you may have about these new, tax-friendly benefits or check out our ICHRA Guide for more information on its background, setup process, requirements, and rules.
Additional resources →
This was post was originally published in 2019 and has been updated in 2024 to reflect the latest policy and regulatory updates.