Can an employee use a Section 125 plan and an ICHRA together?

Yes, but only if the employee purchases an individual health insurance policy on an off-exchange marketplace.

Can a Section 125 plan pay for individual health insurance premiums?

Yes. A Section 125 premium-only plan can pay for individual premiums under specific conditions. When paired with an ICHRA, only pre-tax payroll deductions can go toward premiums for eligible off-exchange individual health insurance plans. Employees who enroll in an on-exchange plan through a public exchange, like the federal Health Insurance Marketplace or a state exchange, can't use a Section 125 cafeteria plan to pay for the portion of their premium that their ICHRA allowance doesn't cover.

Why don’t on-exchange health plans work with a Section 125 plan?

Because public exchanges already offer premium tax credits and other cost-sharing subsidies, federal law prohibits employees from using pre-tax salary reductions under a Section 125 cafeteria plan to pay on-exchange health insurance premiums. This prevents "double-dipping" tax advantages.

Can an ICHRA reimburse an employee’s entire health insurance premium payment?

This depends on the cost of the plan and the employer’s ICHRA allowance. Employers choose a set monthly allowance amount. If an employee's premium exceeds that allowance, they must pay the remaining balance unless they have access to another eligible payment method. If the plan’s cost is less than their allowance, then the ICHRA is essentially reimbursing the employee’s entire premium cost.

Can employers offer different ICHRA allowance amounts to different employees?

Yes. Employers can vary reimbursement amounts using eligible employee classes — such as full-time vs. part-time workers and salaried vs. hourly employees — as long as they adhere to federal ICHRA regulations and nondiscrimination rules. Within each class, they can also vary contributions by employee age and family size.

Does PeopleKeep administer Section 125 plans with an ICHRA?

No. PeopleKeep uses a reimbursement-based ICHRA model and therefore doesn't offer Section 125 premium-only payroll deductions. However, organizations that need this capability can do so with our parent company, Remodel Health. Contact Remodel Health or us to learn more about how our ICHRA administration solutions compare.

Are health benefit plan notices required every year?

Some notices must be provided annually, while others are only required when employees become eligible, after qualifying events, or upon request. Employers should review their compliance obligations each year to ensure they meet all applicable deadlines.

What's the difference between an ICHRA notice and a QSEHRA notice?

Both ICHRAs and QSEHRAs require a written employee notice before the plan year begins. However, each notice includes different information based on the rules governing that type of HRA.

What happens if an employer doesn't provide required health benefit notices?

Missing required notices can lead to compliance issues, employee confusion, and potential penalties. For example, a group health plan or insurer that willfully fails to provide a required SPC may face a penalty of up to $1,000 for each failure6.

Can I pay the PCORI fee electronically?

Yes, you can pay the PCORI fee electronically. You can use the Electronic Federal Tax Payment System (EFTPS).

Do I owe a PCORI fee if I offer both an ICHRA and a group health plan?

Yes, you need to pay a PCORI fee if you offer an ICHRA. The PCORI fee for ICHRA is separate if the group plan is a fully-insured plan, as PCORI only applies to self-funded models. If you offer a self-funded plan alongside an ICHRA to different employees, and they share the same plan year, you can combine them for PCORI fee reporting purposes. Count the average number of participating employees and dependents for the self-funded plan plus the average number of participating ICHRA employees.

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Can section 125 plans be used with an ICHRA?