Individual Reporting Requirement. Employers Offering ICHRA

An Individual Coverage Health Reimbursement Arrangement (ICHRA) is an employer-funded health benefit used to reimburse employees for individual health insurance premiums and other medical expenses. Under the Affordable Care Act (ACA), employers offering ICHRAs have specific reporting requirements to ensure compliance with the ACA's regulations.

Here's an overview of ICHRA reporting under the ACA:

1. Form 1095-C Reporting

Employers offering ICHRAs must report this offer of coverage to the IRS using Form 1095-C, "Employer-Provided Health Insurance Offer and Coverage." This form is part of the ACA's employer mandate, which requires applicable large employers (ALEs) with 50 or more full-time employees (or equivalents) to report the health coverage offered to their employees.

Key Points:

• Part II, Line 14: Employers must use the appropriate code to indicate that an ICHRA was offered to an employee.For example, Code 1M is used if an ICHRA was offered to an employee and the employee's dependents (but not to the spouse).
• Part II, Line 15: Employers must enter the monthly employee contribution for the lowest-cost self-only coverage offered to the employee.

2. Minimum Essential Coverage (MEC)

Employers must ensure that the ICHRA offered meets the ACA's requirements for Minimum Essential Coverage (MEC). Failure to provide MEC can result in penalties under the employer mandate.

3. Affordability

For an ICHRA to be considered affordable under the ACA, the employee's required contribution for self-only coverage must not exceed a certain percentage of their household income. The IRS provides safe harbor methods to determine affordability.

4. Written Notice to Employees

Employers must provide written notice to employees each year, at least 90 days before the start of the ICHRA plan year. This notice must include:

• Information about the ICHRA.
• The maximum dollar amount available to the employee.
• A statement that the employee can opt-out of the ICHRA.
• Information on how the ICHRA affects eligibility for premium tax credits.

5. Coordination with Marketplace Coverage

Employees offered an ICHRA can use it to purchase individual health insurance through the ACA Marketplace. Employers should inform employees how the ICHRA interacts with Marketplace coverage and the implications for premium tax credits.

6. Employer Shared Responsibility Provision

Employers need to ensure compliance with the Employer Shared Responsibility Provision (ESRP) under the ACA, which includes offering coverage that is both affordable and provides minimum value.

Example Scenario:

If an employer offers an ICHRA to an employee and the employee’s required contribution for self-only coverage is within the affordability threshold, the employer would report this on Form 1095-C as described above. The employee can use the ICHRA funds to purchase individual health insurance either on or off the ACA Marketplace.

Compliance with ICHRA reporting requirements is crucial for employers to avoid penalties under the ACA. Employers should work with their payroll and benefits administrators to ensure accurate reporting and to provide the necessary information to employees.

If you need specific guidance or assistance with ICHRA reporting, consulting with a benefits advisor or legal expert in ACA compliance is recommended.

Please contact Todd Covert at [email protected]