What is an ICHRA?
ICHRA “ick-rah” stands for Individual Coverage Health Reimbursement Arrangement.
It allows employers to make a per employee per month tax-free contribution that employees use to be reimbursed for health insurance and other medical expenses. It creates greater design flexibility, has no caps on the employer contribution, and is available to employers of all sizes.
How do ICHRA’s work?
The employer designates which reimbursable expenses will be approved. Then will select one or multiple job classes based on hours, location ect. and set a contribution amount per class. Once the terms of the plan are chosen a per employee per month amount of money will be set aside. After an employee pays for a designated reimbursable expense, they can submit for reimbursement.
What can be reimbursed?
This will vary depending on eligibility and what is chosen by the employer, but an employer has three major options to chose from.
- Insurance Premiums Only, or
- Insurance Premiums + Qualified Medical Expenses, or
- Qualified Medical Expenses only (as defined by the IRS in Publication 502)
If you think an HRA might be right for your business learn more or contact Benafica today at 651.287.3253.