Reporting Changes for Non-ALE Employers Offering ICHRA

Since January of 2020, the NEW Individual Coverage Health Reimbursement Arrangement (ICHRA) has opened the doors, helping business owners of all sizes, implement a more predictable benefits solution.

The BASE® Individual Coverage Health Reimbursement Arrangement (ICHRA) is a tax-advantaged health benefit used to reimburse employees for personal health care expenses, such as individual health insurance premiums and out-of-pocket medical expenses.  It provides a health benefit to better fit the needs of many businesses, regardless of size.

With over 800,000 individuals looking to benefit from the ICHRA by 2024, there is much excitement about it’s potential, but with that excitement comes new questions.

The Affordable Care Act (ACA) introduced Applicable Large Employers (ALEs), which is any company or organization that has an average of at least 50 full-time employees or "Full-Time Equivalents" or "FTEs." For the purposes of the Affordable Care Act, a full-time employee is someone who works at least 30 hours a week.  ALEs have specific requirements they must follow under the ACA.  Most ALE employers are familiar with the 1094/1095 tax form reporting required.

Recently, a question was posed to BASE® - “Do Non-ALE employers (those with less than 50 full-time equivalents) need to file the 1094-B and 1095-B if they sponsor the ICHRA?”

The answer is YES.  Health insurance issuers, carriers, Marketplaces, and government programs typically file to report coverages.  However, because the ICHRA is considered a “self-funded” plan offered by the employer for health coverages, it is the plan sponsor’s responsibility to report coverage for each participant.

Employers, regardless of size, who sponsor an ICHRA plan must complete ACA reporting.  The size of the employer’s organization determines which forms should be completed and filed:

  • Non-ALE (less than 50 FTEs) – Forms 1094-B and 1095-B need to be completed and filed. 
  • ALE employers (50 or more FTEs) – Forms 1094-C and 1095-C should be used.

All forms for 2020 have been modified to add new codes for reporting offers of Individual Coverage HRAs and new lines for reporting required information.  In addition, employers must distribute copies of the Form 1095 either B or C to plan participants. If you have clients enrolled in the BASE® ICHRA, they have received communication from us regarding this information and we recommended working with their tax professional to ensure proper filing with the IRS.

For the ICHRA to be in compliance, employees must first enroll in individual coverage that includes individual policies, student health coverage, and Medicare Part A, B, C premiums.  Individual coverage does not include coverage under a spouse’s group health plan, short-term or limited-duration policies, or health care sharing ministries.  Once eligible coverage is obtained, the employee can submit qualifying premiums and, in some plan designs, Section 213(d) medical expenses for reimbursement. 

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