What employers need to know about Individual Coverage HRAs

Executive overview

Employers paying too much for group health plans can shift to ICHRAs — defined, tax-free reimbursements employees use to buy their own individual coverage. Available to employers of any size, ICHRAs give cost control without forcing a single plan on everyone.

The core trade-off: employers set the budget; employees choose the plan — but affordability rules and ACA reporting requirements must be met.

Eligibility and class size rules

• Available to any employer with at least one non-owner, non-spouse employee
• Not available to self-employed individuals
• Employers with fewer than 100 employees: minimum class size of 10
• Employers with 100–200 employees: class size must be at least 10% of total workforce
• Employers with 200+ employees: minimum class size of 20

Affordability threshold

• For 2024, employee contributions must not exceed 8.39% of household income
• Applies to self-only coverage only
• If affordable: employee and family are ineligible for marketplace premium tax credits
• If not affordable: employee must opt out to claim a premium tax credit

Restrictions on plan mixing

• Employers cannot offer the same employee class a choice between a group plan and an ICHRA
• Offering a group plan to full-time and an ICHRA to part-time is permitted
• Full-time employees cannot be required to choose between the two plan types

ACA compliance reporting

• Employers must correctly complete Form 1095-C to reflect ICHRA offerings
• Accurate reporting is required to meet ACA requirements