An ICHRA is an employer-funded HRA that reimburses employees for medical premiums and expenses. Employees pay their individual insurance premiums and/or medical expenses and then submit receipts for reimbursement from their employer. The employer establishes the reimbursement allowances per employee.

There are two primary differences between the ICHRA model and a traditional HRA:

1. An ICHRA can reimburse individual insurance premiums while a traditional HRA cannot.
2. A traditional HRA must be “integrated” with a group health plan, whereas an ICHRA works with individual insurance plans.
   

No and no. Reimbursements from ICHRA aren’t subject to payroll tax from an employer standpoint and aren’t considered income for the employee.

No. Individuals can’t contribute their own funds to their employer-sponsored ICHRA. This is a responsibility of the employer only. In addition, an HRA is simply a reimbursement. There is no pre-funded account, and funds are only available for reimbursement at the time the expense is incurred.

Yes, if an employer is providing premium-only contributions (vs. medical expense reimbursement) and employees select an HSA-compatible plan.

ICHRA is the reimbursement mechanism for employees to purchase qualified health plans.

Because ICHRA is a reimbursement arrangement (and not an account), the employer simply keeps the dollars that were earmarked for reimbursement. Throughout the year, however, the employee’s unused allowances accrue, but if the employee never submits receipts for the full reimbursable amount, the employer keeps the funds. Employers have the option to either carry over the funds or reset them at the end of the year.

There are no minimum or maximum contribution limits for ICHRA. Furthermore, employers can choose to offer different amounts to different groups of employees.

Yes. Employers may contribute pre-tax dollars to ICHRA for employees, who then apply the contributions toward Medicare and Medicare supplemental insurance costs.

No. In October 2017, President Trump issued an Executive Order asking the Departments of the Treasury, Health & Human Services, and Labor to expand the usability of HRAs. The new rules creating ICHRA were released in June 2019 and went into effect in January 2020.

Yes. When initially setting up the ICHRA, an employer will need to create separate classes for both part-time and full-time employees and then set the reimbursement limits.

Yes. Employers can divide employees into classes (i.e., hourly vs. salary or remote vs. on-site) and then set reimbursable limits by class.