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Are ICHRAs the Future of Benefits?

Are ICHRAs the Future of Benefits?
Posted on Thursday, August 1, 2019 by Sherri Bockhorst
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Almost 1 out of 5 US employees is working part-time, and it’s not because they don’t have other options.

ICHRA-Benefits-for-Part-Time-WorkersThese are people who want flexibility to spend time with family, pursue interests or even transition into retirement (a retirement that might continue to include part-time or alternative work.)

The workplace is evolving and has been for some time. While younger workers have been seen to be driving this trend with their interest in freelancing and other contract work, a good percentage of those over 60 are also engaged in part-time work, making it common among multiple generations.

This represents a paradigm shift where what was previously considered alternative work is now part and parcel of both employers’ approach to workforce management and people’s approach to work. Almost half of employers reported they anticipate hiring contract or temporary workers this year.

With part-time workers making up a sizeable portion of the workforce, employers are beginning to look differently at how to reward them, including offering benefits or access to benefits. However, most part-timers are still benefits-ineligible. According to a recent study by Guardian:

  • 75% don’t have healthcare coverage
  • 86% aren’t getting disability coverage
  • 87% don’t have life insurance

With competition for employees at an historic high, employers are seeking new and affordable ways to attract and retain both full- and part-time employees, along with gig and contract workers.

Benefits can be a powerful inducement, but compliance can be an issue. Both federal and state law prevent employers from providing group coverage to non-employees, and financial and compliance requirements create additional restrictions. Given these limitations, employers may have been better off—and safer from a compliance perspective—simply excluding part-time workers from coverage entirely.

However, new rules finalized earlier this year created two new types of Health Reimbursement Accounts (HRAs), expanding employers’ ability to offer healthcare benefits to their employees.

Individual Coverage HRAs (ICHRAs) are one of the two new options. Effective January 1, 2020, these plans allow an employer to set up notional accounts for employees to be used for individual healthcare coverage or eligible medical expenses. There are no minimum or maximum allowed requirements, and employers can offer different amounts to different types of employees.

This enables employers to retain their group coverage for benefits-eligible employees while extending coverage to previously ineligible populations through ICHRAs. The employer doesn’t have to fund a specific amount of premium cost, providing a fixed-cost solution. Employers can effectively subsidize all or part of an employee’s healthcare coverage premiums without extending traditional group health coverage beyond the Health Reimbursement Account.

ICHRAs offer a potentially powerful tool for employers as they seek competitive advantages in the war for talent, including part-time and gig workers. As this portion of the workforce continues to grow, and employers look for ways to appropriately recruit, retain and reward these employees, the new ICHRAs represent an opportunity to extend benefits cost-effectively while avoiding some compliance pitfalls.

Want to learn more about benefits issues with the evolving workforce and how ICHRAs can help employers meet the needs of part-time and gig workers? View our on-demand webinar.

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