IRS Issues a New Proposed Rule Concerning ICHRAs


The Internal Revenue Service issued a new proposed rule concerning Individual Coverage Health Reimbursement Arrangements (ICHRA) tools and resources, addressing items like employer reporting, affordability, and a non-discrimination rule. The points the rule addresses includes, but are not limited to:

  • An individual is ineligible for a premium tax credit for a month if the individual is covered by an HRA or eligible for an HRA that is affordable and provides minimum value for that month.
  • ICHRAs are considered affordable for a month if the employee’s required HRA contribution for the month does not exceed 1/12 of the product of the employee’s household income for the taxable year and the required contribution percentage.
  • For purposes of section 4980H(b), an employer may use the lowest-cost silver plan for the employee for self-only coverage offered through the exchange for determining whether an offer of an individual coverage HRA to a full-time employee is affordable.
  • Guidance regarding reporting in connection with ICHRAs will be provided in other administrative guidance, including forms and instructions, and may permit the reporting of the employee’s required contribution based on the section 4980H safe harbor(s) used by the ALE.
  • An ICHRA is an eligible employer-sponsored plan, therefore, an offer of an individual coverage HRA constitutes an offer of an eligible employer-sponsored plan for purposes of section 4980H(a).
  • If an individual coverage HRA may be integrated with Medicare, the offer of the HRA to an employee who is enrolled in Medicare provides the employee an effective opportunity to enroll in the HRA and constitutes an offer of coverage to the employee for purposes of section 4980H.
  • If a disproportionate number of HCIs qualify for and utilize the maximum HRA amount allowed under the same terms requirement based on age in comparison to the number of non-HCIs who qualify for and use lower HRA amounts based on age, the individual coverage HRA may be found to be discriminatory, with the result that excess reimbursements of the HCIs will be included in their income.
  • For an employee who purchases off-exchange individual health insurance coverage, the employer may permit the employee to pay the balance of the premium for the coverage through its cafeteria plan.

A copy of the proposed rule can be viewed here. CMS has also issued a training resource on the ICHRA to assist in open enrollment.

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