If you're looking to offer an individual coverage health reimbursement arrangement (ICHRA), you might be wondering if it satisfies the Affordable Care Act's employer mandate.
Let’s take a look.
First, let’s dive into what the employer mandate is and who it affects.
Under the Affordable Care Act’s employer shared responsibility provision (ESRP), employers with an average of 50 or more full-time equivalent employees (FTEs) during the preceding calendar year are considered applicable large employers, or ALEs. They must offer minimum essential coverage (MEC) that's affordable and provides minimum value to at least 95% of full-time employees and their dependents.
Those provisions are what we call the employer mandate, or sometimes “the pay or play provisions.”
To understand how the ICHRA can help an employer meet the requirements of the mandate, let’s discuss what the minimum value and affordability requirements are.
In order to participate in the ICHRA, an employee must have a minimum essential coverage (MEC) policy. The MEC policies that qualify for the ICHRA will almost always meet the minimum value requirement - so, that’s one-half of the mandate down.
Keep in mind that while having a qualified individual coverage plan is a requirement to participate, the employer is responsible for contributing enough to the HRA that the affordability requirement is satisfied. The employee will use those contributions to pay for their individual coverage.
IRS Notice 2018-882 proposes three safe harbors employers can use to determine whether the ICHRA is affordable for the employee:
For 2024, employers can use the federal poverty level (FPL) affordability safe harbor. Under the FPL, employee contributions can't exceed $101.94 per month in the mainland U.S.
The ICHRA allows business owners to satisfy the employer mandate while enjoying the flexibility the HRA provides. If you're interested in offering an ICHRA to your employees, PeopleKeep can help!
Contact a personalized benefits advisor to see how ICHRA can work for your organization!