- Find out how the IRS’s new regs regarding Individual Coverage Health Reimbursement Arrangements (ICHRAs) affects you.
- If you’re now working remotely, find out how your primary site of employment may affect an offer of an ICHRA.
- Learn more about the rules defining an employee’s primary site of employment.
In mid-January, the IRS issued final regulations that clarify the application of employer shared responsibility provisions under the ACA. The regulations also apply to nondiscrimination rules and to Health Reimbursement Arrangements (HRAs). The regs also address Individual Coverage Health Reimbursement Arrangements (ICHRAs).
ICHRAs allow employers to make tax-deductible contributions to reimburse employees for certain expenses. These expenses include all or part of the expenses those employees incur in securing individual health care coverage (including Medicare). More specifically, the regs allow ICHRAs certain safe harbors from the pertinent ACA provisions and Internal Revenue Code rules. Want to know more about how these new regs may affect you? Fiducial has more below!
Safe harbors and ICHRAs
The final regs provide that, to determine whether an offer of an ICHRA to a full-time employee is “affordable” under the ACA, an employer may use the lowest cost silver plan for self-only coverage offered through a Health Insurance Marketplace (or “exchange”) where the employee’s primary site of employment is located.
The final regs also retain a proposed requirement that the employee’s primary site of employment is treated as changed if the employer modifies the location at which the employee is required to perform services and the employer expects the change to be indefinite or permanent.
In some cases, an employee who regularly works from home or at a jobsite other than the employer’s premises may have to work at, or report to, another worksite. In these instances, the site to which the employee reports to provide services becomes the applicable primary site of employment. This is true if the employee could reasonably be expected to report to that site daily.
In addition, the final regs retain a proposed requirement that an employee’s residence may be defined as the primary site of employment if he or she:
- Works from home or at another worksite other than the employer’s premises, and
- Otherwise doesn’t have an assigned office space or worksite to which to report.
The IRS clarifies in the final regs that an employer may rely upon residence information reported by an employee unless the employer has knowledge that the employee has provided inaccurate information. The agency noted that, though the safe harbors provided under the final regs remain voluntary, the responsibility falls on the taxpayer for determining whether a safe harbor applies in their case. Responsibility also falls to the taxpayer to properly report its use —it does not fall to the IRS.
ICHRAs have been a new and notable health care benefits option since the beginning of 2020. As of the end of last year, interest among employers in this type of plan showed growth. Does your organization offer an ICHRA or are you considering adding it to your benefits package? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations to discuss your situation. We can assist you in complying with the ACA and the Internal Revenue Code.
For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.