ICHRA Reporting Requirements - What Employers Should Know?

Here is a step-by-step process that explains how ICHRA works.

Step 1 - The Employer sets a Monthly Allowance

Step 2 - Employees Purchase their own Health Insurance Plans

Step 3 - Employees Need to Submit Proof of their Health Care Expense Documents
to Employer

Step 4 - The Employer Reviews the Submitted Documentation and Reimburses
the Employees

As we discussed above, the ICHRA is the alternative for employers looking to offer their employees health benefits. At the same time, it also benefits employees. Here's how,

• ICHRA allows ALEs to "get out" of taking responsibility for employee health risks.
• ICHRA is more personalized than employer-provided group plans. It allows employees to choose their own individual plans and doctors that fit their needs.
• ICHRA allows employers to focus their time on best serving their clients and not managing employees' complicated group health plans.
• ICHRA reimbursement amounts are tax-free for both the business and its employees.

Here's an overview of ICHRA Design Rules:

• Employers of any size are eligible to offer an ICHRA.
• Stay compliant with our IRS approved ACA solution and meet your filing and postal mailing requirements from one place.Employees can participate in ICHRA and receive reimbursements only if they maintain a qualified individual health plan.
• Employees of different classes (say geographic location, seasonal, part-time, full-time, abroad) can be offered different levels of benefits by the Employer.
• With ICHRA, there are no maximum or minimum limits for monthly reimbursement amounts.
• Employers have the flexibility to offer an ICHRA to the employee at any time throughout the year.
• Employers can't offer an ICHRA to an employee covered under their group health plan. However, they can offer Excepted Benefit HRAs to employees.
• If ICHRA is considered ‘unaffordable’, employees can choose between using Premium Tax Credits or the ICHRA. If it is considered ‘affordable’, then the employee cannot opt-out and receive a premium
  tax credit.
• Once a year, the employees must be given a choice to ‘opt-out’ of receiving reimbursements through
  an ICHRA.
• ICHRA will not reimburse medical care costs like Copay, deductible, short-term, limited-duration insurance (STLDI), and dental- or vision-specific costs.
• If the employee is outside of open enrollment:
  Employees will have 60 days to purchase a health plan once the ICHRA becomes available, as it triggers a special enrollment period. This enables employees to find an individual health plan that meets MEC outside of open enrollment.

Under the Affordable Care Act (ACA), every Applicable Large Employer (with more than 50 full-time equivalent employees) must provide health insurance coverage to their employees. This is known as the
"employer mandate."

ALEs, who fail to offer affordable health insurance coverage, are subject to potential IRS penalties.

So, how is ICHRA Affordability calculated?

ICHRA "affordability" can be calculated for each employee depending on the reference plan where an employee lives or works. In this case, the reference is the Lowest Cost Silver Plan (LCSP).

The two variables highlighted in the above ICHRA affordability equation are tough for the employers to remember. Therefore, the IRS has proposed different affordability safe harbors that employers can use to determine ICHRA affordability.

To determine the Lowest Cost Silver Plan, the IRS has proposed the following safe harbors:

• Location
• Age-Based Bands
• Prior Year

To determine Employee Household Income, the IRS distinguishes the following safe harbors:

• W-2 Wages
• Rate of Pay
• FPL (Federal Poverty Line)

Note: From the above calculation,

• If an ICHRA is "affordable," employees are not eligible for Premium Tax credits (PTC)
• If an ICHRA is "unaffordable," employees can choose either the ICHRA or opt-for Premium Tax
  Credits (PTC)

ACAwise also built an ICHRA Affordability Calculator that allows employers to calculate affordability for each employee at no time. So, if you don't know how much you want to offer your employee for the ICHRA to be affordable, click here.

For Employees:

For Employers:

The IRS mandates the reporting of ICHRA on Form 1095-B/C to the employers who offered ICHRA to their employees.

In the month of October, The IRS has released the final version of 2024 IRS Forms 1095-B and 1095-C which clearly shows that there are no changes in ACA forms for 2024 ACA reporting.

Choose the right ACA Reporting vendor like ACAwise, a comprehensive ACA reporting solution provider to get started with your ACA reporting.

ACAwise helps to generate the ICHRA codes and file your ACA Forms with the IRS, State and distribute the 1095 copies to your employees on-time.

We provide two different reporting services for you to choose from, based upon your requirements.

• ACA Core
• ACA Elite