ACA Update ICHRAs and EBHRAs

December 11, 2019
Man lost in a maze

Starting January 1, 2020, both large and small employers will be able to offer their employees an Individual Coverage Health Reimbursement Arrangement (ICHRA) or an Excepted Benefit Health Reimbursement Arrangement (EBHRA). Although there is a heavy administrative burden placed on employers, as notices and attestation statements need to be sent to and received back from employees, some employers may find a benefit in offering one of these plans.

Below is what we know from recently released regulations. Additional guidance is also expected to be released from the IRS.

ICHRAs allow an employer to reimburse employees for medical premiums and/or medical expenses. For large employers, ICHRAs can be a used to satisfy the employer mandate if the offer is deemed affordable. Below is additional information on ICHRAs.

  • Can be offered in any dollar amount to employees, but employees need to have individual coverage to accept the ICHRA. Medicare Part A and B or Part C qualify.
  • Fully funded by employer contributions.
  • Employers can offer group insurance and ICHRAs; however, they cannot both be offered to the same class of employees. There are 10 employee classes. An employer can decide which class of employees they want to offer the ICHRAs to and which class they want to offer group insurance to, or they can offer ICHRAs to all employees or just full-time employees.
  • The classes of employees are as follows: (Any combination can be used.)
    • Full-time
    • Part-time
    • Location (employees working in different geographic areas)
    • Abroad (non-resident aliens with no U.S.-based income)
    • Temporary employees of staffing firms
    • Employees in a waiting period
    • Employees covered by a collective bargaining agreement
    • Seasonal employees
    • Hourly
    • Salaried
  • Minimum class size applies if an employer offers group insurance and ICHRAs to the following classes: salaried vs. hourly; full-time vs. part-time; geographic location.
  • Satisfy the employer mandate if they are deemed affordable. Regardless of the dollar amount, they will make the 4980H(a) penalty a non-issue if it's offered to substantially all of the employer's full-time employees.
  • Notices need to be sent to employees 90 days prior to the start of the plan year for which coverage will be available to let the employee know that by accepting the ICHRA or by waiving an affordable ICHRA, the employee will not be eligible for a Premium Tax Credit via the Exchange. For newly hired employees, the notice needs to be given 60 days before the start of the ICHRA coverage.
  • Attestation statements need to be signed by the employee prior to accepting the ICHRA and each time a reimbursement is requested.

EBHRAs allow an employer to reimburse for medical expenses. Below is additional information on EBHRAs:

  • Needs to be offered in conjunction with group insurance, although the employee does not need to accept the group insurance coverage.
  • Can reimburse medical expenses but limited to $1800 per year.
  • Cannot be used to reimburse insurance premiums other than premiums for excepted benefits or Short-Term Limited Duration Insurance (STLDI).
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