ICHRA reporting guide

What is an ICHRA?

Individual Coverage Health Reimbursement Arrangements (ICHRAs) allow employers to set healthcare allowances for their employees that can be used for individual healthcare plans from their preferred insurance carriers. Employers establish an allowance each plan year and may also choose to let employees use leftover allowances on other qualified medical expenses. Premiums and other healthcare expenses are tax-free for both employers and employees. You can read more about ICHRAs here.

Reimbursements under ICHRAs are tax-free: employers do not pay payroll taxes on reimbursements, and reimbursements are not reported as taxable income on employee W-2s.

What Reporting and Compliance Requirements Should Employers Know?

ICHRAs, like other benefits plans, have compliance and reporting requirements that employers should understand. These include: Affordable Care Act (ACA) Reporting, PCORI Reporting, ERISA Reporting, and Medicare Part D Reporting and Disclosures.

1) Affordable Care Act (ACA) Reporting

The purpose of ACA reporting is to help the government track insurance coverage and enforce healthcare law. Employers offering ICHRAs comply with ACA reporting using either the Forms 1094-B/1095-B or Forms 1094-C/1095-C. The appropriate forms depend on whether the employer is an Applicable Large Employer (ALE) under the ACA. Non-ALEs satisfy ACA reporting using Forms 1094-B/1095-B. ALEs satisfy ACA reporting using Forms 1094-C/1095-C. In general, an employer is an ALE if it had at least 50 full-time employees (including full-time equivalent employees) on average during the prior calendar year. You can learn more about ALEs here.

What to know:

• Requirements: Employers offering ICHRA must (1) file a 1095 for each employee to the IRS along with an accompanying 1094 transmittal form and (2) distribute a copy of the 1095 for each employee.

• How Thatch Helps: Thatch partners with an ACA reporting vendor who can help you meet your reporting needs as an additional service or you may elect to use your tax or payroll service provider.

• Dates: The 2024 deadline to furnish 1095s to employees and file 1094s and 1095s with the IRS is March 31. Thatch generally recommends circulating 1095s to employees by the end of January to avoid delays.

2) PCORI Reporting

Employers offering ICHRA are required to contribute an annual fee to the Patient-Centered Outcomes Research Institute (PCORI).

What to know:

• Requirements: PCORI fees depend on the number of participants in the employer’s ICHRA. For ICHRA plan years that end between September 30, 2023 and October 1, 2024, the per-participant fee is $3.22 (up from $3.00 for plans ending the same period of the prior year). Employers calculate and report their PCORI fees to the IRS under Part II, Line 133 of Form 720 as an “applicable self-insured health plan.”

• How Thatch Helps: Employers typically file Form 720 with the help of a tax professional. While ICHRA is reported as a single line item on Form 720, Form 720 is much broader than healthcare. A qualified tax professional can tell you whether there are other items that your business must report. Thatch makes it easy to calculate the number your PCORI fees by surfacing the number of ICHRA participants in your Thatch dashboard.

• Dates: Employers must file Form 720 by July 31.

3) ERISA Reporting

The Employee Retirement Income Security Act (ERISA) requires that employers report their employee benefit plans, including ICHRAs, to the federal government via Form 5500. ICHRAs with fewer than 100 participants are typically exempt. Some employers file Form 5500 with accompanying schedules if required by employee benefit plans that they offer outside of Thatch. 

What to know:

• Requirements: Employers offering ICHRAs must report their benefit plans via Form 5500, unless their ICHRA has fewer than 100 participants. Thatch’s ICHRA product does not necessitate the filing of any of the schedules (including Schedule C which, unlike ICHRA, is only required where the benefit plan is funded by a trust). However, some employers may need to include one or more of the schedules if they offer benefits through a platform other than Thatch.

• How Thatch Helps: Employers typically file Form 5500 with the help of their tax services firm. Form 5500 is required of ICHRAs as well as other benefit plans beyond healthcare, such as retirement plans, 401(k) plans, and profit sharing plans. A qualified tax or benefits professional can tell you whether there are other plans you must report. Thatch surfaces all information necessary to report your ICHRA via Form 5500 in your Thatch dashboard.

• Dates: Form 5500 is due 7 months after the end of your benefits plan year. For ICHRAs operating on the calendar year, Form 5500 is usually due July 31.

4) Medicare Part D Reporting & Creditable Coverage Disclosures

Creditable Coverage disclosures are mandated under the Medicare Modernization Act, which requires that employers inform Medicare Part D eligible employees if their current coverage is creditable (i.e. at least as good as prescription drug coverage offered by Medicare) so that employees can make informed decisions before Open Enrollment. Medicare Part D eligible employees are generally 65 or older, with a qualifying disability, or who are enrolled in Medicare Parts A/B. However, employers often include Creditable Coverage notices in healthcare benefit packets for all employees, regardless of eligibility.

What to know:

• Requirements: There are two components of Medicare Part D compliance: (1) reporting Creditable Coverage to the Center for Medicare Services (CMS) and (2) providing Creditable Coverage disclosures to employees that meet certain criteria:

  • (1) CMS Reporting. CMS reporting is completed by the employer through the CMS website. Employers should report “coverage type” as “other type of coverage offered to Medicare Part D eligible individuals” and report the ICHRA as non-creditable.

  • (2) Creditable Coverage Disclosures. Disclosures must be provided to employees who are eligible for Medicare Part D and who have an insurance plan that covers prescription drugs. Many employers provide the disclosure to all employees in their health benefits materials, regardless of eligibility.

• How Thatch Helps: Thatch assists with Creditable Coverage disclosure distribution by providing the disclosure directly in employee dashboards before the annual notice deadline. Thatch also shares a copy of the Creditable Coverage disclosure in employer dashboards which employers can share with employees.

• Dates: Creditable Coverage disclosures must be provided to employees by October 15th. Creditable Coverage must also be reported to CMS on March 1st. Employers are responsible for reporting Creditable Coverage to CMS by the March 1st deadline.

Keep in Mind

This article provides general information about ICHRA compliance and reporting and is intended for educational purposes only. The information presented here may not be applicable to your business. Your business may also have other compliance obligations that are not mentioned in this article. With that in mind, we recommend consulting with a qualified benefits professional or legal advisor for advice specific to your business. 

Questions? Reach out to us at support@thatch.ai