5. The Modern Alternative: ICHRA (Individual Coverage HRA)
While not mentioned in every traditional "HRA cheat sheet," we can’t talk about 2026 benefits without mentioning the Individual Coverage HRA (ICHRA).
Think of the ICHRA as the QSEHRA’s older, more flexible sibling. It was introduced in 2020 and has quickly become a favorite for employers of all sizes. Like the QSEHRA, it allows you to reimburse employees for individual health insurance instead of buying a group plan.
Why choose ICHRA over QSEHRA?
- No Size Limits: Any business can use it, even those with 500+ employees.
- No Contribution Caps: You decide exactly how much you want to give. There is no IRS maximum (though it must be "affordable" for larger companies to avoid penalties).
- Employee Classes: You can offer the ICHRA to certain classes of employees (like full-time workers in a specific state) while offering a traditional group plan to others.
The ICHRA is the ultimate tool for "defined contribution" benefits. You set your budget, and the employees get the freedom to choose the plan that actually fits their family doctor and medication needs. (Just remember, if an employee accepts an ICHRA, they usually can't claim Marketplace subsidies, so you'll want us to help you run the math first!)
Why Accountants Love HRAs (and Why You Should Too)
If you’re an accountant reading this, you’re probably already calculating the FICA savings. But for the business owners out there, here is why your CPA will give you a high-five for setting up an HRA:
- 100% Tax-Deductible: Every dollar reimbursed through a compliant HRA is a business expense that reduces your taxable income.
- No Payroll Taxes: Unlike a bonus or a standard salary increase, HRA reimbursements are not subject to Social Security or Medicare taxes (FICA). This saves the employer roughly 7.65% and the employee 7.65%.
- No "Use It or Lose It" (Mostly): Unlike Medical FSAs, which often have strict "use it or lose it" rules, HRA designs can allow for rollovers of unused funds from year to year. (Though with some plans, like the Section 132 Transit plans we also manage, the rules vary, so check with your advocate first!)
- Recruitment & Retention: In a competitive job market, "we reimburse your medical bills" is a much stronger selling point than "we have a high deductible."
Navigating the HRA Labyrinth
Choosing the right HRA plan design for your business doesn’t have to be a headache. At Total Benefit Solutions Inc., we act as your independent broker and advocate. We don’t just sell you a plan; we shop the market, compare the options, and fight to ensure you are getting the most value for every dollar spent.
Whether you need a simple Section 105 setup for your solo business or a complex ICHRA for a growing team, we have the expertise to navigate the regulatory red tape for you. We never accept "no" as an answer when it comes to maximizing your benefits.
Ready to find the perfect HRA design for your business? We’d love to help you build a benefits package that works as hard as you do.
Contact us today at (215) 355-2121 or visit us online at www.totalbenefits.net.
For more details on specific plan designs and the latest regulatory updates, check out our deep-dive resources here: HRA Plan Design Options
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