Managing ICHRA Enrollments, Affordability & Premium Tax Credits
Navigating ICHRA enrollments involves understanding affordability criteria and tax implications for employees. To participate in the ICHRA, employees must be enrolled in an individual health insurance policy. Eligible policies include qualifying on-exchange or off-exchange coverage, Medicare Parts A and B, or Medicare Part C.
Here are some of the key items to consider when implementing an ICHRA:
On-Exchange vs. Off-Exchange Premiums
On-exchange premiums cannot be paid with pre-tax employee dollars, while off-exchange premiums can be.
Employees that enroll in a health plan where the premium cost exceeds the employer's ICHRA contribution, can utilize a Section 125 plan (Cafeteria) for tax advantages by enrolling in off-exchange coverage.
HSA Insurance is a marketplace offering off-exchange individual coverage to Massachusetts ICHRA employees.
Affordability Criteria
- Applicable Large Employers must ensure that coverage is deemed affordable as they are subject to the ACA requirement to provide affordable insurance.
- Small employers are exempt from ACA requirements but should understand affordability's impact on employee tax credits.
- Employees accepting the ICHRA forfeit premium tax credits for themselves or family members.
- Opting out of the ICHRA may allow employees to claim premium tax credits or qualify for subsidies if coverage is deemed unaffordable.
The IRS provides 3 affordability safe harbors that applicable large employers may use to determine affordability:
- W-2 Wages
- Rate of Pay, or
- Federal Poverty Level (FPL) calculation.
To be considered affordable in 2024, you will need to ensure employees do not pay more than 8.39% of their annual household income or $101.94 per month if you are using the FPL safe harbor calculation.
Employers will want to meet minimum affordability requirements to avoid being charged two potential penalties.
Eligibility for Owners
Owners' eligibility for ICHRA enrollment varies based on the company's structure:
- C-Corp and non-profit owners are typically eligible.
- S-Corp owners may have alternative deduction options but are typically not eligible for ICHRA contribution.
Your ICHRA administrator can assist you in understanding eligibility criteria under ICHRA. Additionally, HSA Insurance can support you with ICHRA implementations for Massachusetts groups and can facilitate referrals to ICHRA administrators.
To learn more about the setup requirements or associated costs of working with our preferred ICHRA partners, reach out to our dedicated HSA ICHRA support team at ichra@hsainsurance.com or call 781-228-2222, select option 4 for ICHRA support.