Senate approves two-year tax credit to encourage ICRA adoption for small employers

The Mississippi Senate approved a two-year tax incentive aimed at encouraging small and mid-size employers to adopt individual-coverage health reimbursement arrangements (ICRAs).

Senator Boyd, who explained the measure, said ICRAs allow employers to reimburse employees for individual-market premiums and medical expenses instead of offering a traditional group plan. "ICRAs were created by federal rule in 2020 to expand access to employer supported health benefits," Boyd said.

The bill allows an employer to claim a credit up to $400 per covered employee in the first taxable year the ICRA is offered and up to $200 in the second taxable year. Boyd said the credit is capped statewide at $1,000,000 per fiscal year and that unused amounts can be carried forward for up to 10 years if the credit exceeds an employer's tax liability. Employers claiming the credit must satisfy a maintenance-of-effort requirement so they do not simply reduce prior benefit spending to qualify.

Senators asked about plan quality and whether the credit might encourage employers to reduce benefits; Boyd said the maintenance-of-effort test was designed to prevent that. The committee substitute was adopted and the bill passed by morning roll call; the Department of Revenue will administer the credit and review three-year reports from participating employers.

Quote: "The first year, an employer may obtain a credit up to $400 per covered employee ... the second taxable year, the employer can claim a credit up to $200," Senator Boyd said on the floor.

Next steps: Sponsors said they will monitor the program's effectiveness and the Department of Revenue will collect required reporting data.