Recently, the IRS has released important criteria to help employers who offer Individual Coverage Health Reimbursement Arrangements (ICHRA) comply with the Affordable Care Acts’ employer shared responsibility provisions to a new type of Health Reimbursement Arrangement (HRA) available starting in 2020. This new type of HRA is referred to as an Individual Coverage HRA, or ICHRA.
Among the highlights:
- Proposed Safe Harbors for Applicable Large Employers (ALE) who Offer an ICHRA to a Full-Time Employee, explains how to calculate the amount of the “required employer contribution” to be noted on Line 15 of Form 1095-C. Additionally, employers may use a “location-based safe harbor” and a “look back” safe harbor to help determine whether the premium for self-only coverage will refer to the current or group calendar year.
- Location-Based Safe Harbor permits employers to use the lowest-cost silver plan for self-only coverage through the Exchange where the employee’s primary site of employment is located. The employer is not required to use an employee’s actual residence to determine affordability, unless the employee’s worksite is his or her home (due to remote or telecommute work).
- Age-Related Issues while specific safe harbors based on age have not been established by the proposed regulations, an ALE may use the age of the oldest employee to determine the ICHRA contribution for employees in that class. An employer may vary the amount of the ICHRA contribution based on age by no more than a 3:1 ratio between the oldest and youngest participant.
Look-Back Month Safe Harbor provides employers the opportunity to also utilize the look-back month when selecting the lowest-cost silver plan. If the ICHRA operates on a calendar year basis, the employer may use the premium for self-only coverage under the lowest-cost silver plan from January of the prior calendar year. If the ICHRA operates on a non-calendar basis, the employer may use the monthly premium amount from January of the current calendar year.
The Internal Revenue Service proposed regulations can be viewed in their entirety here.