An ICHRA is funded directly by the employer and does not require a separate bank account, trust, or pre-funded reimbursement account.
How does ICHRA funding work?
Employers fund reimbursements as expenses are incurred
Unlike many traditional employee benefit plans, an ICHRA is generally not funded through a separate account that holds money in advance.
Instead:
The employer sets a monthly reimbursement allowance
Employees submit eligible reimbursement requests
Approved reimbursements are paid by the employer
Funds remain with the employer until reimbursements are due
This approach is often referred to as a "pay-as-you-go" funding model.
Do I need to set up a separate bank account?
Most employers do not need to establish:
A trust account
An escrow account
A dedicated HRA bank account
A pre-funded reimbursement pool
Employers typically reimburse employees from their normal business operating accounts when reimbursements become due.
When does the employer actually spend money?
Employers only reimburse approved expenses
An employer incurs costs when:
An employee becomes eligible for the ICHRA.
The employee maintains qualifying health coverage.
The employee submits an eligible reimbursement request.
The reimbursement is approved.
The employer pays the reimbursement.
If an employee does not submit eligible expenses, the employer generally does not spend the full allowance amount.
What happens if employees do not use their full allowance?
Unused allowance typically remains with the employer
An ICHRA allowance represents the maximum amount available for reimbursement.
If employees do not submit eligible expenses:
The employer keeps the unused funds
No reimbursement is required
Actual employer costs may be lower than the total available allowance
Example
An employee receives a $600 monthly allowance.
Approved expenses submitted: $400
Reimbursement paid: $400
Unused allowance: $200
The employer is generally not required to pay the unused $200.
How are reimbursements paid?
Reimbursements are usually processed through payroll or accounts payable
Employers commonly pay approved reimbursements through:
Payroll systems
Direct deposit processes
Accounts payable workflows
The reimbursement method depends on the employer's internal processes and plan administration setup.
How does Take Command help administer funding?
Take Command tracks reimbursements and allowance usage
Take Command helps employers:
Track employee allowances
Verify reimbursement eligibility
Review reimbursement reports
Monitor remaining balances
Manage ongoing plan administration
Take Command does not require employers to pre-fund a separate reimbursement account.
Are there minimum or maximum funding requirements?
No annual contribution minimum is required
Employers decide how much to contribute to an ICHRA.
There is:
No minimum contribution requirement under federal ICHRA rules
No maximum annual contribution limit imposed by ICHRA regulations
Applicable Large Employers (ALEs) should consider ACA affordability requirements when determining contribution amounts.
Not applicable
If your organization is not an Applicable Large Employer (ALE), ACA affordability calculations generally do not apply.
What if my company wants predictable healthcare costs?
ICHRA provides budget control
Because employers choose the reimbursement allowance, ICHRA allows organizations to:
Set a defined healthcare budget
Avoid annual group plan premium increases
Scale benefits as the workforce grows
Forecast maximum benefit exposure
Actual costs are often lower than the theoretical maximum because not every employee uses their full allowance.