Operational compliance is central to maintaining a lawful ICHRA.
Substantiating Individual Coverage
Employers must verify that each participant (and dependents, if applicable):
- Is enrolled in ACA-compliant individual health coverage, and
- Maintains coverage for every month they receive reimbursement.
This is typically documented through:
- Premium invoices
- Carrier confirmations
- Marketplace documentation
- Third-party administrator attestation systems
Substantiating Reimbursable Expenses
Reimbursements must satisfy IRS substantiation standards:
- Date of service or coverage
- Amount paid
- Description of the item or service
- Proof of payment
Unsubstantiated reimbursements are prohibited.
Monthly Verification
Because individual insurance can terminate for nonpayment of their Individual and Family Plans, employers must confirm Minimum Essential Coverage (MEC) before reimbursing premiums each month.
Forfeiture Rules
If Individual and Family Plan (IFP) Minimum Essential Coverage (MEC) lapses:
- The employee immediately loses ICHRA eligibility
- Remaining allowance balances are forfeited
- Unspent balances revert to the employer.
COBRA and ICHRAs
ICHRAs are group health plans under ERISA; therefore, COBRA applies. Continuation cost is typically based on:
- The maximum annual allowance, or
- The balance remaining at the time of the qualifying event