You have probably heard all the buzz about offering an Individual Coverage Health Reimbursement Arrangement (ICHRA.) And at first glance, it sounds like the perfect blend of cost-saving flexibility and employee-level benefits to provide. But does the ICHRA platform work for every type of business? Are there certain company types that are served better by the group plan instead? If you have questions about the types of businesses or entities that can leverage the popular reimbursement arrangement, you’re not alone.
Today, we’ll highlight what you need to know about the ICHRA guidelines as they pertain to eligible business types and participation benchmarks. The IRS has simplified the rules and qualifications, making the ICHRA solution an option for nearly every type of company. And the benefits to the businesses and the employees are far-reaching. You might be surprised to learn just how many business types are finding their best benefits path forward with the ICHRA model.
Companies Based on Structure
Companies, of course, vary in structure, by region, by industry segment, and by size. What makes sense in Florida may not be a good idea in North Dakota. Licensing for an electrician can be different for a company in Colorado from North Carolina. Part of the allure of offering an ICHRA model is the flexibility to be customized across a wide variety of business profiles. An ICHRA can be offered by any type of business structure, including LLC, S-Corp, or Partnership. As long as there is one documented employee within the organization, any business structure can participate.
Government entities and municipality groups can offer an ICHRA plan to staff members. These types of groups are typically stand-alone entities under the rules or umbrellas of a municipal governing individual or group. With employees or at least one employee, these entities can often find huge benefits in offering a cost-effective, budget-sensitive ICHRA option.
Private Sector Companies
Private sector companies, governed by boards of directors or sole proprietor entrepreneurs, can offer an ICHRA plan to employees regardless of structure. If your business is a regional-based provider with multiple locations, an ICHRA might be perfect. If you’re a two-person operation working out of a home-based office, you, too, qualify to offer an ICHRA.
Non-profit organizations are also permitted to structure and offer an ICHRA to staff members. Much like government entities, non-profit businesses are typically required to adhere to strict budgets throughout the year. And an ICHRA may be the ideal benefits platform to fit the non-profit finances.
Based on Company Size
Individual Health Coverage Reimbursement Arrangements can be offered by any company with at least one employee. ICHRA benefits can cover a variety of employee types, as well.
One W2 Employee Minimum
The IRS guidelines suggest that any business entity with at least one W2 employee is considered a qualified company to participate in offering an ICHRA plan. With some of the other HRA types, there are some restrictions for a company with more than 50 team members. But for the basic ICHRA plan, only one employee is required, and there is no cap on the maximum number of employees covered.
Full-Time or Part-Time Employees Can Participate
The ICHRA makes sense for a lot of small and medium-sized businesses because its umbrella of eligible participation reaches far beyond the traditional employee. Because today’s workforce is more diverse and often includes a mix of both full and part-time staff, the ICHRA is a great way to offer benefits to both groups.
Seasonal & Temporary Workers
Many medium and large companies use seasonal and temporary workforces to augment their full-time teams during peak seasons or for special projects. An ICHRA is an excellent option for these types of companies because the reimbursement platform is applicable to both seasonal and temporary workers. And a company can maintain a group plan for year-round staff and offer the ICHRA to these seasonal teams. As long as no one person is provided both a group plan and an ICHRA, it’s a great way to structure the benefits program to accommodate everyone.
Does it matter if you’re a masonry contractor or a financial advisor? The short answer is no. Eligibility to participate and offer an ICHRA is not affected by what type of business you are or what you offer.
Anyone providing a service within a service sector can take advantage of the ICHRA platform. This includes everyone from carpet cleaning services to home inspectors. If you are a service provider, you can offer an ICHRA.
Retail & Products
The retail industry and those businesses that are considered product-driven can also benefit from the flexible nature and affordability of an ICHRA. Whether you’re selling online crafts or are an authorized automotive dealer, you can participate. Regardless of what you sell, you’re able to adopt an ICHRA plan and offer it to your teams.
Religious organizations are oftentimes also eligible, as they qualify as a non-profit with at least one W2 employee on record. Any churches or places of worship, with employees, bookkeepers, housekeeping, or non-profit arms with staff, can offer an ICHRA plan. It’s a great way to provide direct reimbursement benefits to a variety of employee types under the religious entity’s umbrella.
The IRS has also made things easy for businesses looking to offer ICHRAs by removing any limits for reimbursement rates. The ICHRA model is proving to be a vastly approved and popular approach to employee benefits this year. If you were previously undecided and on the fence about moving forward with an ICHRA for your teams hopefully, this breakdown of company types and eligibility will hopefully help you in your decision-making process.
And when your company is ready to take the next step with setting up an ICHRA, you might still have some questions about getting started or exploring how to customize your process. Contact W3LL to explore getting your ICHRA in place and help you decide the best way forward. The days of one-size-fits-all group health insurance may be in the rearview mirror. For personalization and flexibility in employee reimbursement benefits, the ICHRA is a great option. And to help you launch yours, W3LL is a great partner.