Key Insights on the ICHRA for Small Businesses

If you are thinking about offering your employees the new ICHRA, take a moment to read the insights below.

Class size rule

You face the class size rule only if you offer a traditional group health plan to one class of employees and an ICHRA to another.

Minimum class size example

You cover four full-time employees with group health coverage and offer an ICHRA of $400 a month to your 12 part-time employees. Eight of the part-time employees accept. You satisfy the “same terms” rule and meet the class size requirement.

No minimum class size example

You face no minimum class size requirements when you don’t offer a traditional group health plan. Say you have seven employees. You can offer a $16,000 ICHRA to your two salaried employees and a $5,000 ICHRA to your five hourly employees.

Carryover rules

You can establish your ICHRA so employees can carry over unused amounts to next year.

Section 125 Plan strategy

You can use a cafeteria plan (a Section 125 plan) to let those employees who purchase individual health insurance coverage outside of a public exchange pay the uncovered part of the premium, which allows you and your employees to save on taxes.

Avoiding the $100-a-day-per-employee penalty

The ICHRA avoids the Affordable Care Act’s $100-a-day-per-employee penalty for reimbursing individually purchased health insurance.

Not subject to affordability rules

Businesses with fewer than 50 employees are not subject to affordability rules under Section 4980H, providing additional flexibility.

Qualifying insurance

Insurance that qualifies for the ICHRA includes individual coverage purchased through an exchange or on the open market, and Medicare.

As you can see, an ICHRA has several advantages for the small business.

How We Can Help

Sterling Tax and Accounting is here to help your business with tax planning!  Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket.  If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.

Learn how to proactively save on taxes by scheduling a call with our tax planning specialists.

Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes.

Welcome to the Sterling Standard of business!  Want to learn more?  Schedule a meeting with our tax planning team here:  https://www.sterling.cpa/contact-us/