An Individual Coverage Health Reimbursement Arrangement (“ICHRA”) became an available option for employers beginning January 1, 2020. An ICHRA is available to employers of any size to reimburse employees for individual health care coverage (i.e., health coverage bought through the Marketplace, private insurance, or Medicare Part A and B or C coverage), subject to certain design requirements (employee classes and class sizes). ICHRAs are also subject to ERISA requirements (i.e., 5500 reporting, SPD, and SBC requirements) unless an exception applies such as for governmental and church plans or a safe harbor.
The ICHRA is considered minimum essential coverage subject to the Internal Revenue Service (“IRS”) reporting requirements authorized under the Affordable Care Act (“ACA”). Employers who offer an ICHRA must submit annual reporting forms to the IRS beginning in 2021 for 2020 plan years and every year thereafter.
For small employers, those with fewer than 50 full-time equivalent employees, Form 1095-B must be submitted for every employee who had coverage under the ICHRA. Form 1095-B lets the IRS know which employees, and their dependents, were enrolled in minimum essential coverage. It also helps the IRS validate the eligibility for subsidized coverage on the Health Insurance Marketplace since enrollment in an ICHRA disqualifies an employee from receiving subsidies. Small employers also must submit one Form 1094-B on behalf of the organization to the IRS.
For large employers, those with 50 or more full-time equivalent employees and subject to the Employer Mandate, employers must offer health insurance that is affordable and provides minimum value to 95% of their full-time employees and their children up to the end of the month in which they turn age 26 or be subject to penalties. Coverage is considered affordable if employee contributions for employee-only coverage do not exceed a certain percentage of an employee’s household income, which is 9.83% in 2021. Employers must submit Form 1095-C for every full-time employee. Form 1095-C must also be submitted for any non-full-time employee who was enrolled in ICHRA coverage. The primary purpose of Form 1095-C is to help the IRS determine if an applicable large employer met the requirements of the Employer Mandate or if a penalty applies. Large employers also must submit one Form 1094-C on behalf of the organization to the IRS.
The deadline for filing the electronic ACA reports is March each year. If the deadlines are missed, don’t delay as late filings are subject to penalties.
Employers offering ICHRAs must ensure that they comply with ACA reporting requirements. Contribution Health, LLC hosts the EE-Track Alliance service for all ACA reporting needs including filing reports for ICHRAs. Please contact the Contribution Health Compliance Team to learn more about this service.
Please be aware that the determination of the requirements and the application of specific laws and regulations to this topic may differ due to a number of variables. Nothing in this newsletter should be construed as tax or legal advice.