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How to add Health FSA benefits to an ICHRA (Individual Coverage HRA)

The Individual Coverage HRA integrates with non-group health insurance chosen by the employee and reimburses them for those premiums.  Employers can add Health FSA benefits to an ICHRA for more employee choice in health care and maximize tax savings.

add a health FSA to an ICHRA for improved coverage

Health FSAs can pay for prescriptions and many over-the-counter medical products.

Individual Coverage HRA — new for 2020

The response to the Trump administration’s expansion of Health Reimbursement Arrangements to include non-group health plans was tremendous. The result? Today, thousands more employees have full control over their choice of health coverage, free of one-size-fits-all group health insurance.

The next step for many employers is to add Health FSA benefits to an ICHRA. It’s a low-to-no-cost add-on that brings even more savings to both the employee and the employer.

How it works

A Health FSA is funded with tax-free payroll deductions. During the company’s annual open enrollment period, workers choose how much to set aside in the FSA each year for eligible medical expenses. The employee’s annual election amount cannot exceed the annual limit set by the employer (up to the annual allowance set by the IRS).

This annual amount is equally divided across each pay period for the year. When an employee has an eligible medical expense and pays it, evidence of the expense is submitted to the employer for reimbursement up to the election made for the plan year.

When the employee uses the full amount pledged for the year, reimbursements end. If the employee fails to use all of the money set aside in the FSA, the balance is surrendered to the employer (who may use it to cover administrative costs of the plan).

Choosing to add Health FSA benefits to an ICHRA puts more power in an employer-sponsored health plan. For the employee, it’s like getting a huge discount on these medical costs (up to 40% in tax savings), while the employer enjoys payroll tax savings of 8% to 10%.

Health FSAs are subject to uniform coverage and surrender rules under the IRS Code.

How to add Health FSA benefits to an ICHRA

To realize pre-tax savings, Section 125 of the Code requires an employer to have a plan document specific to the Health FSA. That’s where we come in — making it easy and affordable.

The Core FSA Plan Document package provides employers with everything they need to establish an IRS- and DOL-compliant Section 125 plan with Health FSA* for just $129. This cost reflects a one-time setup fee, not an annual charge.

Click here to order.

*Electronic (.pdf) version only; upgrade to the deluxe binder version for only $50.

Health FSA Administration

Every Core FSA Plan Document package comes with an employer’s guide for companies choosing to self-administer the plan.

For employers looking to outsource administration, Core Admin offers packages for 1 or more employees. These packages provide 24/7/365 access to employees to check fund balances, make updates to personal information, and more. Employees will also have Health FSA debit cards to make on-the-spot payments for medical expenses at a provider’s office, a local pharmacy, or online.

Perhaps best of all, outsourcing administration relieves the employer of HIPAA laws governing the handling of sensitive employee health information.

To learn more, visit the Core Admin page or speak with Loretta or Danielle at 1-800-755-3373, ext. 1005.

More Section 125 tax savings

The Core FSA module is part of a Section 125 Cafeteria Plan, which allows employees to pay their share of health insurance premiums and supplemental benefits with tax-advantaged payroll deduction.

When a company arranges for ICHRA-covered employees to pay individual coverage health insurance premiums through the plan, employees save up to 40% in taxes (income and payroll) while the employer saves 8% to 10% in matching payroll taxes.


Add a Health FSA to an ICHRA

Deluxe binder version

Employees Save up to 40% with Tax-Free Medical, Dental, Vision Expenses at Work

$129 one-time fee in PDF via email

$179 one-time fee in PDF email + Deluxe Binder via USPS

Add Health FSA benefits to an ICHRA to further reduce payroll taxes for both the employer and the employee.

A Section 125 plan Health Flexible Spending Account (FSA) allows employees to use pre-tax dollars to pay for eligible out-of-pocket medical, dental and vision care expenses not covered by other insurance.

For the employee, it’s like getting as much as a 40% discount on medical, dental and vision care, while the employer realizes up to 10% in matching FICA and other tax savings. Employers recoup the small $129 one-time setup fee quickly and then continue to realize tax savings year after year.



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No annual fee — Core Documents does not require an annual renewal fee to maintain your plan document package. A plan document only needs to be updated when there are changes in the plan or in the law that make it necessary. We will notify you when there are sufficient changes in the Code to require amending and restating your Plan and ask that you keep us informed when there is a change to your plan.  You can amend and update your plan document anytime, at a discounted fee and only when necessary, which is the most cost-effective way to maintain it.

Fast Service — Most orders placed by 3 PM are returned via email the same day, Monday through Friday. Weekend orders are sent out Monday morning. Plan document packages are processed in the order received. During our busiest months (December, January, and February), the rush order fee (see order form) marks your document to be processed immediately.

Refund Policy: Goods and services provided by Core Documents, Inc. are non-refundable upon receipt. Orders canceled prior to shipping are subject to a fee to cover the cost of goods and services provided during the review, draft, and preparation of your order.

The Trusted Source of Affordable Benefit Plan Documents for over 20 Years.

Core Documents is the country’s leading provider of cost-effective, tax-saving benefit plan documents for Section 125 Cafeteria plans and Health Reimbursement Arrangements. The Trusted Source since 1997, thousands of satisfied agents and employer groups nationwide rely upon Core Documents for free plan design consulting services, plan document updates, ERISA Wrap SPDs, and administration services.