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ICHRAs and ACA Reporting Requirements

Posted on January 13th, 2021

Individual Coverage Health Reimbursement Arrangements (ICHRAs) first became available in 2020. ICHRAs allow employers to reimburse employees for individual health insurance coverage (or Medicare coverage) that employees obtain on their own. ICHRAs provide employers with an alternative to offering traditional group health insurance coverage to employees.

Although ICHRAs may not be a traditional way of providing benefits to employees, ICHRAs are considered minimum essential coverage, and ICHRAs are subject to the Internal Revenue Service (IRS) reporting requirements authorized under the Affordable Care Act (ACA). Employers who offer an ICHRA must submit annual reporting forms to the IRS for the 2020 calendar year as well as in future years.

Small employers, those with fewer than 50 full-time equivalent employees, must submit Form 1095-B for every employee who had coverage under the ICHRA in 2020. Form 1095-B lets the IRS know which employees (and dependents of the employee) were enrolled in minimum essential coverage in 2020. It also helps the IRS validate the eligibility for subsidized coverage on the Health Insurance Marketplace since enrollment in an ICHRA disqualifies an employee from receiving subsidies. Small employers also must submit one Form 1094-B on behalf of the organization.

Large employers, those with 50 or more full-time equivalent employees and subject to the Employer Mandate, must submit Form 1095-C for every full-time employee who was employed in 2020. Form 1095-C must also be submitted for any non-full-time employee who was enrolled in ICHRA coverage in 2020. The primary purpose of Form 1095-C is to help the IRS determine if an applicable large employer met the requirements of the Employer Mandate or if a penalty applies. Large employers also must submit one Form 1094-C on behalf of the organization.

Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), which work very similar to ICHRAs but are only available to employers with fewer than 50 full-time equivalent employees, are not subject to the ACA reporting requirements. QSEHRAs first became an option for small employers to offer in 2017. QSEHRAs were signed into law as part of the 21st Century Cures Act and by definition are not considered minimum essential coverage. As a result, QSEHRAs escape the ACA reporting requirements.

For more information on the ACA reporting deadlines which are rapidly approaching, please read our ACA Reporting Deadlines and Reminders blog.


Have a question about ACA Reporting Requirements?

Want to learn more about ICHRAs? Visit our ICHRA page.


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