Beginning in 2020, employers have two new options for providing their employees with health care benefits. Both options are Health Reimbursement Arrangements (HRAs) which are account-based group health plans funded solely by employer contributions. Salary reduction or other employee contributions are permitted, and reimbursements are excludable from the employee’s income for tax purposes.
ICHRAs can be offered by employers of any size for plan years beginning on or after 1/1/20.
There is no minimum or maximum limit on employer contributions to the ICHRA.
Employees can use the funds to reimburse any qualifying medical expenses, including premiums paid for individual health insurance policies.
Using an ICHRA, employers can provide their employees with a tax-favored method to pay for health coverage and the employer doesn’t have to be involved with plan selection and costly policy administration.
EBHRAs can also be offered by employers of any size for plan years beginning on or after 1/1/20.
For plan years that start in 2020, employers are limited to contributions of $1800. This amount will be adjusted for inflation beginning in 2021.
Any amount that the employee doesn’t use can be carried forward to the next year and it won’t count toward the annual limit.
Employees can use the funds to reimburse payments for qualifying medical expenses, except for individual and group health insurance premiums (other than COBRA).
Copays, deductibles, and premiums for excepted benefit coverage, like vision, dental, and short-term limited duration coverage are all reimbursable expenses.