ICHRA reimbursements are based on monthly allowances, apply only to eligible expenses incurred during the active plan year, and generally cannot be changed retroactively.
How are ICHRA reimbursements determined?
Employers establish a monthly reimbursement allowance for each eligible employee or employee class.
Employees may be reimbursed for eligible health insurance premiums and qualified medical expenses up to their available monthly allowance.
Can reimbursement allowances be changed?
Yes. Employers may update reimbursement allowances for future months or future plan years.
Changes generally become effective at the beginning of a future month and cannot be applied retroactively.
Can reimbursements be backdated?
No. Employers cannot retroactively create reimbursement eligibility for months before:
The ICHRA became effective.
The employee became eligible.
The expense was incurred.
Only eligible expenses incurred during the active plan year may be reimbursed.
Can employers reimburse partial months?
Generally, no. ICHRA allowances are administered as monthly benefits rather than daily prorated amounts.
If an employee is eligible for reimbursement during a month and meets the plan requirements, the employer generally reimburses up to the available monthly allowance rather than calculating a daily amount.
When should employers update reimbursement amounts?
Allowance updates should be completed before the beginning of the next plan year whenever possible.
Employers may also be required to provide advance notice before new allowance amounts become effective.
When does this article not apply?
This article applies only to ICHRAs.
Qualified Small Employer HRAs (QSEHRAs) follow different reimbursement rules.
Key takeaway
ICHRA reimbursements are based on monthly allowances and future-effective plan changes. Employers cannot retroactively change reimbursement eligibility or allowance amounts.