HRA Reporting Requirements
ICHRA AND QSEHRA
HRA Reporting Requirements Employers Must Abide By
What Needs to Be Reported on Form W-2?
For those employers offering an ICHRA there is no need to report this benefit on the employees W-2’s. However, those employers who are offering the HRA benefit of a QSEHRA do have requirements for reporting on the W-2’s.
QSEHRA is not considered a group health plan according to IRS Notice n-17-67 and is not subject to many group health requirements. This doesn’t mean that small employers do not have reporting requirements. One requirement is employers must report the total benefit on every eligible employee’s W-2.
The QSEHRA benefit should be reported in Box 12 using the designated code FF. It is important to report the total allowance that the eligible employee was entitled to receive during the calendar year, regardless of the actual payments or reimbursement amounts received.
Only the newly available QSEHRA funds should be included in the permitted benefit amount. Any carryover amounts from previous years should be excluded from the calculation.
It is worth noting that since a QSEHRA can be established at any time during the calendar year, it may have a short initial plan year. In the case of a non-calendar-year QSEHRA, the permitted benefit amount for the calendar year should be prorated accordingly.
For instance, if your organization offers $300 per month and the QSEHRA plan year begins on July 1, 2024, you will report $1,800 on the employee’s 2024 W-2. This calculation represents $300 multiplied by six months of permitted benefit in 2024.
Similarly, if an employee’s eligibility or allowance changes within the year, the reported amount on their W-2 should be adjusted proportionately to reflect the change.
To account for taxable QSEHRA reimbursements, employers need to track employees’ health coverage status throughout the year. Reimbursements made when an employee does not have Minimum Essential Coverage (MEC) are subject to income tax, as well as reimbursements for a spouse’s group health plan coverage.
Taxable reimbursements should be treated as other taxable income and included in Box 1 of the W-2, along with wages, tips, and other compensation.
If an employer discovers that an employee lacks proper minimum coverage after filing the W-2, a Corrected Wage and Tax Statement (W-2c) should be provided to the employee. The employer must also file this form with the Social Security Administration (SSA).
It is important to note that these taxable reimbursements do not affect the amount reported in Box 12, code FF. It is advisable to consult with your payroll provider or tax professional to assist with W2 reportable wages in QSEHRA’s.
PCORI fees
All employers with self-insured plans, including those offering ICHRA or QSEHRA, regardless of their organization’s size, are required to pay an annual fee to the Patient-Centered Outcomes Research Institute (PCORI) and submit Form 720.
For plan years ending before October 1, 2024, the PCORI fee amount is $3.22 per covered life. However, for plan years ending on or after October 1, 2024, the fee increases to $3.47 per covered life.
The deadline for payment of the PCORI fee is July 31 following the plan year. It’s important to note that the PCORI fee, which was initially set to expire in 2019, has been extended through 2029 by the Further Consolidated Appropriations Act of 2020.
Compliance with the PCORI fee requirement is necessary for employers with self-insured plans, including ICHRA and QSEHRA, and it is advisable to consult with tax professionals or refer to the latest IRS guidelines for accurate and updated information on this matter.
ICHRA ACA reporting for small employers
If your organization has fewer than 50 full-time equivalent employees (FTEs), there are specific reporting requirements you need to fulfill to maintain compliance. These obligations include submitting annual health coverage information to your employees and to the IRS.
Submitting Form 1094-B and Form 1095-B to the IRS
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Form 1095-B provides details about the coverage your organization offers to employees. You must submit a separate Form 1095-B for each employee who had an ICHRA during the plan year.
Form 1094-B is a summary sheet that includes the total number of Form 1095-Bs submitted to the IRS.
Providing employees with Form 1095-B
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Each Form 1095-B includes Employee information, months of coverage and all other dependents covered under the plan.
You must provide this form to all employees, that participated in the ICHRA, including those who were enrolled for at least one month during the tax year.
Ensuring timely distribution of forms to employees
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Employers must provide employees with Form 1095-B by January 31.
These forms must be filed with the IRS by February 28 (for paper filers) or March 31 (for electronic filing).
It’s important to fulfill these reporting obligations accurately and within the specified timeframes. Consult with a tax professional or refer to the latest IRS guidelines for precise instructions and up-to-date information on tax reporting and compliance.
ICHRA ACA Reporting for Large Employers (ALEs)
Applicable large employers (ALEs), which are organizations with 50 or more full-time equivalent employees (FTEs), have additional responsibilities to comply with the Affordable Care Act (ACA) employer mandate. These obligations include submitting annual health coverage information to your employees and to the IRS.
If ALEs meet the employer mandate using an HRA, they must ensure that the reimbursement provided to employees is sufficient to make individual health coverage affordable. To meet the affordability requirement, the reimbursement allowances must be such that the cost of the lowest-cost silver-tier insurance plan on the ACA marketplace or state exchange does not exceed 8.39% of the employee’s household income for 2024 and 9.02% for 2025.
To maintain compliance, ALEs must complete the following tasks:
Submit Form 1094-C to the IRS
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This form provides information about the coverage offered to employees including affordability and ALE information.
It should include every full-time employee from the tax year and every part-time employee who was enrolled in the ICHRA. As well as number of employees broken down monthly by full-time and total employee count.
Send Form 1095-C to employees
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This form includes specific codes that explain how affordability was calculated.
It must be provided to all employees who were full-time for at least one month. Remember ACA definition of full-time is working 30 hours or more per week for ALE’s.
Ensuring timely distribution of forms to employees
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Employers must provide employees with Form 1095-C by January 31.These forms must be filed with the IRS by February 28 (for paper filers) or March 31 (for electronic filing).
It is crucial to fulfill these reporting obligations accurately and within the specified timeframes. Consulting with a tax professional or referring to the latest IRS guidelines will provide precise instructions and up-to-date information on tax reporting and compliance for ALEs.
Flyte HCM has an ACA Reporting Solution for both small and large employers. For other reporting requirements, it is advisable to consult with a tax professional and refer to the latest IRS guidelines for accurate and updated information on reporting and compliance requirements for both ICHRA and QSEHRA.
5500 Reporting
Form 5500 plays a crucial role in the comprehensive reporting and disclosure framework of ERISA (Employee Retirement Income Security Act). Its purpose is to gather the necessary information to ensure that employee benefit plans adhere to specific standards for their operation and management. By collecting this data, the form enables participants, beneficiaries, regulators, and other stakeholders to access sufficient information, safeguarding the rights and benefits of individuals covered under these plans.
Annual Filing Requirements
According to ERISA, Form 5500 is mandatory for welfare benefit plans, including ICHRA plans. However, there is an exception known as the “small plan exception,” which exempts plans from filing if they meet the following conditions during the plan year:
- The plan has fewer than 100 participants on the first day of the plan year.
- The plan is funded from the employer’s general assets, insurance, or a combination thereof.
Reporting Deadlines
For ICHRAs operating on a calendar year basis (January 1st to December 31st), the deadline for filing Form 5500 is on or before July 31 annually. In the case of ICHRAs that commenced during the calendar year and intend to operate on a calendar year basis going forward, the first plan year is considered a “short” plan year, ending on December 31st. The Form 5500 for the short plan year must be submitted by July 31, annually.
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