What Are The ICHRA Pros And Cons?
ICHRA plans allow businesses of any size to reimburse employees tax-free for medical care. ICHRA plans allow for employers to modify eligibility and allowance amounts.
There are several employee classes that businesses can structure eligibility around.
- Full-time employees
- Part-time employees
- Salary employees
- Hourly employees
- Seasonal employees
- Temporary employees who work for a staffing firm
- Employees covered under a collective bargaining agreement
- Employees in a waiting period
- Foreign employees who work abroad
- Employees in different locations, based on rating areas
- Any of the above in combination
To be part of ICHRA employees will need to pay for eligible Marketplace insurance or Medicare plans.
Employees will have access to a monthly allowance that will help cover eligible costs. Once the allowance limit is reached the employee will be responsible for paying the remainder of expenses. Employees will be required to provide proof of their expenses.
The Pros Of ICHRA
- Tax-free: Employers do not need to pay payroll taxes as well as employees. Employees also do not need to pay income taxes on these reimbursements.
- Works with businesses of all sizes: There are no restrictions to business size with ICHRA plans.
- Employers can choose eligibility requirements: Employers have up to 11 different employee classes that they can configure to change eligibility in a way that works best.
- No minimum participation requirements: there are no minimum participation requirements associated with the ICHRA.
- Employers have more control over their benefits budget: Employers have the freedom to update their allowance amounts throughout the year.
- No Maximum allowances: There is no maximum amount that can be reimbursed to your employees. You make the decision of how much you would like to reimburse them for.
- Employees choose the health plans that work for them: Employees can choose from any eligible health plans that work best for them.
- State agnostic: ICHRA plans work in any state and across all of them as well. So if you have employees across the nation ICHRA plans might be great for you!
The Cons Of ICHRA
- May be new to employees: ICHRA has not been around for a very long time and you may need to give a detailed explanation to your employees.
- Does not cover certain employees: Only employees with individual health insurance or Medicare are permitted to participate.
- Employees must choose to use tax credits or ICHRA: Employees must choose between the premium tax credits or ICHRA. Employees can not take both.