Insurance
What are the ICHRA Plan Documents Required?
Learn about the essential plan documents required for an ICHRA and how Liferaft simplifies the process for businesses.
August 18, 2023
The Individual Coverage Health Reimbursement Arrangement (ICHRA) allows organizations of all sizes to provide tax-free reimbursements for individual health insurance premiums and eligible medical expenses. With its flexibility and potential cost savings, ICHRA has recently gained significant popularity.
By reimbursing tax-free funds for individual health insurance premiums and qualifying medical expenses, ICHRA offers flexibility and affordability. Setting up an ICHRA plan involves fulfilling specific requirements and submitting essential documents. This article will cover all the necessary ICHRA plan documents your business will need and how Liferaft, an affordable HRA administrator, can simplify the process.
Any business, governmental body, or religious organization can establish an ICHRA. No limits on business size or reimbursement rates exist, providing an inclusive solution for many organizations.
ICHRA plan documents establish the framework and guidelines for your unique plan. Every ICHRA plan is customizable to your specific business needs and budget. In the Summary Plan Document (SPD), you will define employers' and employees' rights and responsibilities, ensure compliance with regulations, and provide a clear understanding of the benefits and processes involved.
Below are the main components that should be included in each plan’s documents.
The plan documents should identify the named fiduciaries and plan administrators responsible for overseeing the ICHRA plan. These individuals are crucial in managing the plan's operations and ensuring compliance with relevant regulations.
The plan documents should outline the eligibility requirements for employees to participate in the ICHRA plan. This includes criteria such as the duration of employment, minimum hours worked, and any other specifications defined by the employer.
The effective dates of participation specify when employees become eligible to participate in the ICHRA plan. The plan documents should communicate the timeline for employees to enroll and receive reimbursements.
The plan documents should detail the benefits the ICHRA plan provides, including the types of expenses that are eligible for reimbursement. This includes individual health insurance premiums and other qualifying medical payments. It's essential to specify any exclusions or limitations to avoid misunderstandings.
Any expense defined as a medical or dental expense by IRS Publication 502 is eligible to be covered by your plan—but as an employer, you do not need to cover it all. Liferaft will help customize your plan’s eligible expenses according to your budget and business needs.
The plan documents should outline the funding mechanism for the ICHRA plan, including the sources of funds and how the reimbursement process works. Employers need to ensure that employees are reimbursed promptly for their eligible expenses.
The plan documents should provide clear instructions on how employees can submit claims for reimbursement. This includes documentation, submission deadlines, claims review, and payment process. Transparent and efficient claims procedures are crucial for a smooth employee experience.
Protecting employees' privacy and adhering to HIPAA regulations is of utmost importance. The plan documents should designate HIPAA privacy officers responsible for safeguarding protected health information (PHI) and ensuring compliance with privacy rules.
Depending on the nature of the ICHRA plan and the organization's location, federal mandates or requirements may need to be addressed in the plan documents. This ensures that the plan remains in compliance with applicable laws and regulations.
The plan documents should include procedures for amending the ICHRA plan if necessary. This allows for flexibility in adapting to changing circumstances. Additionally, there should be clear guidelines on how to terminate the plan if the need arises.
To ensure a smooth and successful ICHRA plan setup, here are some best practices for preparing the required plan documents:
Submitting the required ICHRA plan documents is a crucial step in the setup process. Employers should ensure timely submission to avoid any disruptions in providing benefits to employees. The plan documents should be submitted before the plan's start date, and participants should receive the Summary Plan Document (SPD) within 120 days of the plan's creation. For new participants joining an existing ICHRA, the SPD should be provided within 90 days.
Failing to provide the necessary plan documents can have consequences. If ICHRA participants request to see the plan document and the employer fails to produce it, there may be IRS fines. Not delivering the SPD to participants within the specified timeframe can also result in further penalties.
Navigating the complexities of ICHRA plan documents can be overwhelming, especially for businesses juggling multiple priorities. Liferaft is an affordable HRA administrator that makes setting up and managing an ICHRA plan easy.
By choosing Liferaft as your HRA administrator, you can alleviate the burden of compiling extensive plan documents for the ICHRA. Liferaft generates all the required documents, ensuring accuracy and compliance with regulatory standards. Their user-friendly platform streamlines the management of employee reimbursements, simplifies the onboarding process, and facilitates transparent communication.
Yes, the IRS allows businesses of all sizes, including those with only one W-2 employee, to establish an ICHRA plan. As for business owners, it depends on the legal entity type of the business. C-corporation owners can participate in the company’s ICHRA, but S-corporation owners cannot. Partners and Sole Proprietors also cannot participate, but if their spouse is a regular W-2 employee of the company, they can be added as a dependent on their spouse's ICHRA plan. See our post on business owner HRA participation for further details.
The plan documents should be submitted before the plan's start date. Employers must also provide participants with the Summary Plan Document (SPD) within 120 days of the plan's creation.
Failure to produce the plan document when ICHRA participants request may result in IRS fines. Not delivering the SPD within the specified timeframe can also lead to penalties.
Yes, Liferaft is an HRA administrator and generates all the required plan documents, simplifying the business setup process.
Liferaft provides a user-friendly platform that facilitates transparent communication, streamlines the management of employee reimbursements, simplifies the onboarding process, and ensures compliance with regulatory standards. Liferaft is the most affordable HRA administrator on the market, with a robust 100% digital platform and fully automated reimbursements. To see exactly how Liferaft stacks up against other HRA providers, please visit our HRA pricing page for a full feature comparison.
Our team knows the ins and outs of the health insurance marketplace and will guide you towards the solution that make the most sense for your business and your team. Come with questions! Our experts are happy to dig into the details to get you the clarity you need.
During the call, Liferaft will run a cost-benefit analysis on your company's current healthcare spending and show you different ways you can save—without sacrificing plan quality. After your consult, Liferaft will design a unique plan for your employee's health insurance, including suggested plans and accounts, plan policy documents, and the annual budget.
