Who Can I Offer an ICHRA To?
Employers of any size may offer an Individual Coverage Health Reimbursement Arrangement (ICHRA). But (ICHRAs come with a lot of “buts,” as you’ll see), employers cannot offer an ICHRA and a traditional group health plan to the same class of employees. But you could, for instance, offer a group health plan for full-time employees and an ICHRA for part-timers.
Employers can determine how to structure reimbursements and eligibility to employees based on 11 employee classes:
- Full-time employees
- Part-time employees
- Seasonal (short-term) employees
- Salaried employees
- Non-salaried (hourly) employees
- Employees covered by a particular collective bargaining arrangement (different bargaining units can be separate classes)
- Employees who are in a waiting period -- the time an employee must work before their job-based benefits coverage begins
- Temporary employees of staffing firms
- Non-resident aliens with no U.S.-based income
- Employees working in the same geographic location such as the same state or region
- A combination of two or more of the above
Allocation by employee class
For instance, you could allocate all full-time employees $400 per month and all part-timers $200 a month. Or employees in one state one amount and a different allotment to those in another state, where the cost of living is higher. Another option would be to offer different amounts based on family size: single, married and family.
But (there’s that word again) you cannot, for example, allocate one amount to some salaried employees and a different amount to other salaried employees.
If you choose to vary the amounts by age within a class, you may only offer higher allowances to older employees. Allowances for the oldest employees in a class may be no more than three times higher than allowances offered to the youngest employees. For instance, if you allot 22-year-old Joe, the youngest person in the company, $200 a month, you cannot give 70-year-old Fran, the oldest (and still not retired because she loves her job so much), more than $600 per month.
Other than family status and age, an ICHRA must be offered to every person in the same employee class.
The so-called “new-hire provision” allows employers to offer new employees an ICHRA while continuing group coverage for existing employees, even in the same employee class. Under this provision, employers set a date in their plan documents that would make employees who are hired any time after Jan. 1, 2020, eligible for an ICHRA. A different new hire date can be set for each class of employees. This strategy can be used to transition over time from a group health plan to an ICHRA.
IIf you offer a traditional group health plan to one class of employees and an ICHRA to another, you may be subject to a minimum class size rules. These thresholds are based on the size of the employer on the first day of the plan year. But … this does not apply if you offer an ICHRA as your only health benefit.
- Companies with fewer than 100 employees: 10 employees
- 100 to 200 employees: 10% of the total employees
- 200 or more employees: 20 employees
When do class sizes apply? When an employer with two or more employee classification groups (1) offers at least one group of employees an ICHRA while offering any other employee group a traditional group health plan, and (2) the employee groups are defined by a combination of one or more applicable classes and one or more other class, with the exception of the waiting period class. Existing employees can be grandfathered into a group health plan while new employees are offered an ICHRA.
The rule applies only when employee groups are defined by at least one status from each class group.
Applicable classes: Salaried, non-salaried, full time, part time and employees within the same rating area. An exception to this rule is class size by region or rating area -- geographical units made up of counties, metropolitan statistical areas, or three-digit codes. So, even if you have just a couple of employees working in another state, for example, those two workers would still be eligible for an ICHRA.
Other classes: Employees with a collective bargaining agreement, those younger than age 25 and non-resident aliens.
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