Recent Posts:ICHRA Plans
ICHRA’s
New for 2020
The individual coverage health reimbursement arrangement (ICHRA) is inching closer to implementation: in January 2020, businesses of all sizes will be able to offer the new benefit.
The ICHRA was proposed through regulation from the Departments of the Treasury, Labor, and Health and Human Services in October 2018. With an ICHRA, businesses offer employees tax-free money instead of a traditional group health insurance policy.
One of the first steps in setting up an ICHRA is to create a formal plan document. ERISA and IRS rules require all businesses offering an employee benefit plan to set up governing documents, including businesses offering alternative health plans like the ICHRA.
First, the business sets a monthly allowance for each employee. Employees then spend that money on health care, including individual health insurance policies, and submit proof of their purchases to the business. The business reviews this documentation and reimburses employees up to their allowance amount. There are no caps on how much money the business can offer through the ICHRA. The ICHRA also permits businesses to offer different allowances to different employees, according to 11 employee classes:
As an employee health benefit, the ICHRA is subject to ERISA.
ERISA Section 402 states that every employee benefit plan be “established and maintained pursuant to a written instrument,” or plan document. ERISA also requires the business to make the document available to employees and their families.
Businesses must also create a summary plan document (SPD), which provides a summary of the full document to participants. While the plan document is written in legalistic language, the SPD must be written so the average plan participant can understand it.
ERISA § 2520.102-3 outlines what the SPD should include, including participants’ benefits, rights, and obligations under the plan.
There are no specific penalties for failing to meet these requirements, but a business will be subject to IRS fines if ICHRA participants ask to see the plan document and the business doesn’t produce it. Additionally, the business could subject itself to fines if it doesn’t deliver the SPD to participants within 120 days of the ICHRA’s creation. For new participants in an existing ICHRA, the business has 90 days to deliver the SPD.
ERISA outlines several items each plan document must include. However, there are additional items relating to the ICHRA that businesses should also include as a best practice.
We’ll list the 10 items your ICHRA plan documents should include, note whether that item is required by ERISA, and explain each item in detail below.
The 10 items are:
The federal government requires employees participating in the ICHRA to have individual health insurance. Employees covered by a spouse's group health insurance plan, employees participating in a health care sharing ministry, or employees who choose to go without health insurance coverage cannot participate in the ICHRA. Here are some of the most popular expenses that will be eligible for reimbursement under the ICHRA:
Non-eligible expenses include:
Make sure to check out IRS Publication 502 (IRC Section 213(d)) for a full list of all eligible expenses and our other blog posts for more information.
Dan Padden | 01/14/2020
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