top of page
  • bill3766

ICHRAs: Pros and Cons for Employers

An individual coverage health reimbursement arrangement (ICHRA) is an employer-funded health care account offering an alternative to traditional group health plans. Employers can reimburse employees’ premiums for individual health insurance policies tax-free. ICHRAs provide cost control and flexibility but may not suit all employers, especially those with employees qualifying for ACA premium tax credits. Employers should weigh the benefits and drawbacks before implementation, considering factors like administrative burden, compliance requirements, and potential impacts on employees’ ACA tax credits. Click here for article.

  • Cost Control and Flexibility: ICHRAs allow employers to set annual reimbursement limits, offering control over healthcare spending and eliminating high-cost claims or substantial rate increases. They can tailor contributions by employee class and maintain traditional plans for different employee groups.

  • Tax Advantages and Compliance: ICHRAs provide tax benefits for employers and employees. Contributions are tax-deductible, and reimbursements are tax-exempt. Employers must ensure the ICHRA meets ACA affordability thresholds to avoid penalties.

  • Administrative and Compliance Challenges: ICHRAs require substantiation of individual health insurance enrollment, annual notices, and adherence to ERISA and COBRA regulations. Many employers may need to invest in third-party administrators to handle these tasks.

  • Impact on Employees and Premium Tax Credits: Employees must purchase individual health insurance, which may be less familiar and involve higher cost-sharing. ICHRAs can disqualify employees from ACA premium tax credits, potentially limiting their financial assistance for health insurance.

0 views0 comments


bottom of page