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Struggling with rising health care costs and complex group plans? ICHRA offers a smarter way to provide flexibleand affordable health benefits your employees will appreciate. These FAQs break down how ICHRA can save yourbusiness money and reduce hassle while helping you attract and keep top talent.Small Business ICHRA FAQs:Control Costs With Smart BenefitsWhat is an ICHRA?An ICHRA (Individual Coverage Health ReimbursementArrangement) lets employers reimburse employees for individualhealth insurance and medical expenses tax-free. It’s a flexiblealternative to traditional group plans.Why are more small businesses choosing ICHRA now?Group plans are expensive and inflexible. ICHRA helps managecosts, gives employees more choice, and can be tailored byemployee type. It’s especially useful when participation in groupplans is low.How does it work?You set a monthly allowance. Employees buy their own healthinsurance and submit receipts. You reimburse them throughpayroll. That’s it.What counts as “affordable” under ACA rules?Affordability means the employee’s premium after reimbursementis less than 8.39% of their income. The IRS allows you to use safeharbors like W-2 wages or federal poverty levels to estimate this.What are the setup and compliance requirements?You’ll need a legal plan document, formal notices to employees,and a way to verify claims while protecting privacy. Mostbusinesses use a third-party administrator to manage this.Who can participate?W-2 employees with qualifying individual coverage. C-Corpowners can participate, too. S-Corp owners, sole proprietors, andpartners generally cannot unless they hire a spouse as a W-2employee.What can ICHRA reimburse?You decide. Options include premiums only, premiums plus out-of-pocket medical costs, or medical costs only.What are the tax advantages?Contributions are tax-deductible for the business.Reimbursements are tax-free for employees and exempt frompayroll taxes. It can also help larger employers avoid ACApenalties if structured correctly.Can I offer ICHRA to some employees and a groupplan to others?Yes, if you separate them into distinct classes like full-time vspart-time or different locations. Each class must be treatedconsistently, and some class sizes have minimums.How much does it cost to offer?You choose the reimbursement amount, so it fits your budget.Admin fees vary, but total costs are often much lower thantraditional group coverage.What if an employee leaves?They keep their individual policy. You keep the unused funds. NoCOBRA or ongoing coverage obligations.Can it work for remote or multi-state teams?Yes. ICHRA works especially well for distributed teams, sinceemployees can buy coverage based on where they live.How do I explain ICHRA to employees?Keep it simple. You give them money to buy the plan that worksbest for them. They get more control and can keep their planeven if they change jobs.What if someone doesn’t use all of their allowance?Unused funds stay with your business. You can decide whether toadjust allowance amounts each year.How is ICHRA different from just giving a healthstipend?Stipends are taxable. ICHRA is not. That tax savings can besignificant for both you and your employees.Q U I C K L O O K : W H Y S M A L L B U S I N E S S E S A R E S W I T C H I N G T O I C H R AControl health costsStay compliant with ACA rulesAttract and retain top talentOffer flexible benefits your team wantsICHRA puts you in control, helping you save money, attract talent, and stay compliant. Ready to learn if ICHRA fits yourbusiness? We’re here to guide you every step of the way.Connect with a OneDigital team member to get personalized guidance and support.