New IRS Legislation Enables Individual Coverage HRA (ICHRA)

On June 13, the U.S. departments of Health and Human Services, Labor and the Treasury released final rules allowing employers of all sizes that do not offer group health coverage to fund a new kind of health reimbursement arrangement (HRA), known as an individual coverage HRA (ICHRA).

This reverses IRS guidance from the Obama administration. Under IRS Notice 2013-54, employers were effectively prevented from offering stand-alone HRAs that allow employees to purchase coverage on the individual market.

Starting Jan. 1, 2020, employees will be able to use employer-funded ICHRAs to buy individual-market insurance, including insurance purchased on (or off) the public exchanges formed under the Affordable Care Act (ACA).

FAQs on the new rule can be found here.