If you’ve never heard of individual coverage health reimbursement accounts (ICHRAs), it’s likely you’ll start to in 2024.
The topic was one that had the crowd rolling during a session at a Viking Cove Institute’s Industry Leaders Summit on Saturday, where panelists touched on the reimbursement account’s soon-to-be popularity among small business employers wanting to cut down on expenses.
Enacted during the Trump Administration, ICHRAs put the onus on employees to find individual health care coverage. With this benefit, employers provide a tax-free monthly allowance for their employees to utilize on health care coverage or other medical costs.
The way it works is that an employee would submit an incurred medical expense to their employer, and the employer would then reimburse them on the charge. While the employer would still be responsible for administration expenses, they save on expenses by defining the plan’s budget themselves, along with other tax-advantage opportunities.
“Right now, the primary driver is just pure expense,” said Thomas Clark, chief operating officer and partner at the Wagner Law Group. “High single digit, low double-digit increases, every year, year-over-year, just kills [plan sponsors].”
Employers also removes their chances of litigation, as offering an ICHRA relieves them of their status as a health care fiduciary.
On the employee side, instead of spending more on health care, supporters of the benefit say participants can use that money to allocate towards an emergency savings account, a 529, or retirement planning.
The emergence of the benefit presents an opportunity for advisors to educate their plan sponsor clients on the tool, as more retirement plan advisors offer holistic services that span past long-term savings benefits.
However, advisors will first have to expand their knowledge on the individualized health plan benefit and on health care plans in general, especially considering the current absence of transparency in the health care industry.
“There is a significant learning curve on health care that is not necessarily there for retirement,” added Clark. “There is so much more lack of transparency, that even for our advisor community who knows retirement, it’s just a new form of language.”
As more plan sponsors look to their advisors for guidance outside of retirement planning, Strategic Retirement Partner’s Jeff Cullen acknowledged that learning about the health care industry will not only set advisors apart from their competitors but may also solidify a client’s devotion to them.
“If a retirement plan advisor can bring transparency to the healthcare system like they do in retirement, then [the employer] will be indebted to you for life,” he said.
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