A Broker's Guide to ICHRA Compliance
ICHRA compliance is a complex and nuanced subject, so Take Command provides an end-to-end HRA administration platform to ensure your clients are covered and do all the heavy lifting!
Our ICHRA administration is software designed to alleviate the administrative burden of managing an HRA. In one easy-to-use platform, it helps your client remain compliant, generate legal paperwork and reporting, ensure employees’ privacy, help employees enroll in health insurance, and much more.
As you guide your client toward ICHRA, make sure you can reinforce the benefits of a skilled HRA administration platform like Take Command. Here are some of the top ICHRA compliance questions and our answers, so you feel confident discussing ICHRA compliance with your clients.
ICHRA Compliance Q&A
Q: Is ICHRA subject to COBRA and ERISA?
A: Yes. ICHRA is considered a group health plan, so it is subject to COBRA and ERISA. Since employees must have their own individual health plans under ICHRA, the employees’ health insurance will automatically continue even if they lose their job or experience another qualifying event. With the COBRA option through an ICHRA plan, employees will have the opportunity to continue to receive reimbursements through the HRA after paying an additional monthly premium to the employer. Employees will have to determine if electing COBRA through ICHRA is a good move for them.
Q: How is the COBRA premium calculated for ICHRA?
A: Employers set the COBRA rate at the beginning of the plan year. A rate will need to be calculated for each separate ICHRA employee class. The COBRA premium amount can include a 2% administration fee. There are two different methods for determining the plan’s cost:
Past-cost – COBRA Premium = Average amount reimbursed per employee during the previous plan year + inflation factor + 2% admin fee
Actuarial – Cobra Premium= ICHRA monthly allowance + 2% administration fee
Q: What happens if the employee loses their individual health insurance?
A: Under the individual coverage health reimbursement arrangement, the employee must secure their own health insurance policy to participate and receive reimbursements. If the employee fails to maintain their health insurance policy, for example, by failing to pay their premiums, they will not be eligible to receive COBRA coverage (in this case, continuing to participate in the HRA).
Q: Is there an Employer Tax Penalty for failing to meet COBRA requirements?
A: Yes, this tax could be as much as $100 per qualified beneficiary, but not more than $200 per family, for each day that the taxpayer is in violation of the COBRA rules.
Q: Can ICHRA be used to reimburse medicare premiums?
A: Yes. ICHRAs are the vehicle through which employers can pay Medicare premiums for employees in the most optimized, tax-advantaged way. To qualify for an ICHRA, the employee eligible for Medicare must have coverage of Part A and Part B together or Part C. Part B alone doesn’t qualify as Minimum Essential Coverage (MEC).
Q: Can employees claim premium tax credits and participate in ICHRA?
A: No. Premium tax credits (PTCs) are tax credits that help individuals and their families purchase health insurance coverage through the healthcare marketplace if affordable health coverage is not offered through their employer. If ICHRA is offered and deemed affordable, employees must choose their HRA over a premium tax credit.
Q: How is ICHRA affordability calculated?
A: ICHRA is considered affordable if the remaining amount an employee must pay for a self-only silver plan on the exchange does not exceed 9.12% of an employee’s income in 2023.
Q: How does Take Command help my client?
A: Take Command ensures your client checks all the right boxes to remain complain with regulations. We worry about all the details and provide your client with the correct forms and information for all reporting needs. All of which is accessible through the client dashboard and help is just a click or call away.
