2026 ICHRA employee classes: rules, class types, eligibility

This post was originally published in 2021 and has been updated in 2026 to reflect the most recent changes.

Traditional group health plans have been the default for decades. But that default is quietly shifting. Employers across industries are rethinking how they offer health benefits and a growing number are discovering that there's a more flexible, cost-predictable alternative.

It's called the Individual Coverage Health Reimbursement Arrangement, or ICHRA, and it's no longer a niche option. The number of people using ICHRA plans to pay for coverage is 2.8 times higher than it was just a year ago.¹ That kind of growth doesn't happen without a reason. Employers are finding that ICHRA gives them something traditional group plans rarely do: the ability to set a defined benefits budget, offer meaningful coverage, and tailor benefits to different groups of employees. All without the unpredictable cost increases that come with group insurance renewals.

The key to making ICHRA work is understanding how employee classes function. ICHRA allows employers to divide their workforce into up to 11 distinct classes and offer different reimbursement amounts to each. That's the flexibility that makes this benefit so powerful and this guide walks you through exactly how it works.

What are ICHRA classes?

ICHRA employee classes enable employers to strategically allocate their health benefits budget by grouping employees based on objective criteria like hours worked, geographic location, or employment type. This classification system is a defining feature of ICHRA, providing unprecedented flexibility in benefit design.

Key points about ICHRA classes:

• Different classes can receive different reimbursement amounts

• Classes can be combined with traditional group health plans

• Each class must have only one type of benefit offering

• Classifications must be based on legitimate job criteria, not discriminatory factors

How ICHRA classes work 

The ICHRA employee class system allows remarkable flexibility. Employers can offer a traditional group health plan to one class while providing ICHRA to another. For example, full-time employees might receive group coverage while part-time workers get ICHRA benefits.

There's just one caveat. Within any single class, employees cannot choose between ICHRA and group coverage. Each ICHRA employee class must have one consistent benefit offering.

→ Read more for switching classes within an ICHRA. 

The 11 ICHRA employee classes

Here are all available ICHRA classes and their definitions:

Additional details about ICHRA employee classes

Multiple collective bargaining agreements:

Employers with multiple CBAs should note that each agreement qualifies as a separate class under ICHRA. You can also combine CBA classifications with other permitted classes. For example, you can create full-time and part-time CBA subclasses by combining the CBA class with employment status classes.

Geographic location flexibility:

Geographic classes are designed for scaling reimbursements across employees in the same insurance rating area, state, or multi-state region. This allows employers to account for varying healthcare costs across different locations.

Temporary employee advantages:

ICHRA is particularly beneficial for temporary employees of staffing firms. Unlike traditional group plans with unpredictable costs, ICHRA allows employers to set a fixed monthly budget for temporary workers while giving these employees faster access to healthcare coverage they need.

Age and dependent adjustments:

Each class can be further divided by age and number of dependents. This means employers can offer higher reimbursements to older employees (within the 3:1 ratio limit) or those with families, recognizing their typically higher healthcare costs.

Combination class flexibility:

When creating combination classes, employers have significant flexibility to meet their specific needs. The ability to combine two or more of the standard classes means virtually endless customization possibilities while maintaining compliance.

ICHRA class size requirements

When offering both traditional group plans and ICHRA to different classes, minimum class size requirements apply. These rules prevent employers from keeping healthy employees on group plans while shifting higher-risk employees to individual insurance through ICHRA. This protection ensures the individual insurance market remains balanced and affordable for everyone.

Classes subject to minimum size requirements:

• Salaried employees
• Non-salaried employees
• Full-time employees
• Part-time employees
• Employees in the same geographic rating area

Minimum class size requirements based on employer size (counted on first day of plan year):

• Employers with <100 employees: 10 employees minimum
• Employers with 100-200 employees: 10% of total employees
• Employers with 200+ employees: 20 employees minimum

Additional class size rules:

• Combination Classes: Minimum size requirements apply to any combination class that includes salaried, non-salaried, full-time, part-time, or geographic rating area employees—unless combined with waiting-period employees, which removes all restrictions
• Geographic Classes: State-level classes have no minimum size (even a single employee in a remote state is acceptable). However, smaller rating areas like counties must meet the standard minimums
• ICHRA-Only Exception: These minimum class sizes only apply when offering both group plans and ICHRA. Employers offering multiple ICHRA classes without any group plan have no size restrictions

Important Reminder: Minimum class sizes only apply when at least one class is being offered a traditional group plan. If an employer is offering multiple ICHRAs to different classes, there are no minimum class size restrictions.

→ Learn more about our ICHRA administration software 

How ICHRA classes impact reimbursement rates

ICHRA classes enable precise benefit customization by allowing different monthly allowances for different employee groups. This flexibility lets employers allocate their benefits budgets strategically, ensuring that employees in various demographics receive appropriate financial support for their healthcare needs, while streamlining their benefits spend.

Employers can set different reimbursement rates for each class of employees under ICHRA based on factors like geographic differences in healthcare costs, full-time versus part-time status, age-based premium variations (following 3:1 ratio limits), and family size considerations.

2026 ICHRA reimbursement limits

For 2026, the IRS has set the following maximum reimbursement limits:

• Self-Only: $6,450 per year ($537.50/month)
• Family: $13,100 per year ($1,091.66/month)

These limits represent what employers can reimburse tax-free. There is no requirement to offer the maximum. Most employers set allowances based on their budget and local market costs. To get an idea of individual health insurance costs where your employees live, check out our Health Insurance Market Snapshot tool.

2026 ACA Affordability standard

For applicable large employers (50+ full-time equivalent employees), ICHRA must meet ACA affordability requirements to satisfy the employer mandate and avoid IRS penalties. In 2026, to meet the affordability standard, an employee's required contribution toward the lowest-cost silver plan in their area, after the ICHRA reimbursement, must not exceed 9.96% of their household income (up from 9.02% in 2025).

In plain terms: if you're contributing enough that your employee can purchase the benchmark silver plan for under 9.96% of their income, you're compliant. If you're not sure whether your current allowances hit that threshold, that's exactly the kind of calculation our team can help you work through.

ICHRA classes in action: Real-world industry examples

Understanding the 11 classes in the abstract is one thing. Seeing how they work in practice for your industry is another. Here's how two of the most common ICHRA use cases play out.

Manufacturing

Manufacturing employers typically manage a workforce split between salaried managers and hourly production workers, often across multiple facilities in different states. This is where ICHRA classes shine.

A mid-sized manufacturer might structure their benefits like this: salaried employees receive a group health plan through a regional carrier, while hourly workers in multiple states are each offered an ICHRA with a geographic class structure. A production team in Ohio receives a different reimbursement amount than one in California, appropriately reflecting the higher cost of coverage on the West Coast. Seasonal workers hired during peak production periods fall into their own class with a separate allowance.

The result: predictable benefits spend, no more renewal surprises, and workers in every state have access to coverage that fits their local market, without the employer having to manage multiple group plan contracts.

Learn more about ICHRA for manufacturing companies

Restaurants

The restaurant industry faces a benefits challenge that group plans were never really designed to solve: a workforce that's constantly shifting between full-time, part-time, and seasonal status, with high turnover and thin margins.

ICHRA's class structure addresses this directly. A restaurant group might offer full-time front-of-house staff one reimbursement level, part-time and seasonal workers a lower allowance, and salaried managers a higher one, all under the same ICHRA umbrella. When a server moves from part-time to full-time, they simply transfer to the appropriate class. When a seasonal hire comes on for the summer rush, they're enrolled in the seasonal class without disrupting the rest of the benefits structure.

For multi-location groups, geographic classes allow each location's employees to shop for coverage in their own local market, rather than being forced into a group plan that may not even include their nearest providers.

Learn more about ICHRA for restaurants

Changing classes within an ICHRA

When employees move between ICHRA employee classes due to promotion, relocation, or schedule changes, specific rules govern the transition. The process varies based on whether the change is voluntary or involuntary.

Smooth transitions occur when:

• Movement isn't due to termination or hour reduction
• Employee maintains continuous employment
• Change is due to legitimate business reasons (promotion, transfer, schedule change)

Special considerations:

• Employees losing ICHRA eligibility due to hour reduction may qualify for COBRA
• Unused ICHRA funds can transfer when moving to a class with different reimbursement levels
• Loss of ICHRA coverage triggers a Special Enrollment Period (SEP) for individual insurance
• If moving to a class without ICHRA, the SEP allows purchasing coverage on or off the Exchange

Employees can still request reimbursement for expenses incurred during their enrollment period, even after changing classes. The key is that expenses must have been incurred while actively enrolled in the ICHRA. 

Understanding rating areas for geographic classes

Rating areas are geographic zones used by insurers to set premiums based on local factors:

• Healthcare costs in the region
• Provider network availability
• Population health characteristics
• Competition among insurers

These areas, defined by state or federal authorities, can be as large as an entire state or as small as a county. For ICHRA classes, this matters because:

• Employers can create classes based on these rating areas
• Different areas may justify different reimbursement amounts
• State-level geographic classes have no minimum size requirements
• County or smaller rating areas must meet standard minimum class sizes

2026 updates to ICHRA classes

No structural changes to ICHRA employee classes have been made for 2026 — the existing 11-class framework remains intact. For HR professionals evaluating ICHRA for the first time, that's actually good news. The rules are stable, the compliance landscape is well-established, and you're not navigating a moving target.

What has changed for 2026 is the broader market context. According to the HRA Council's 2025 Growth Trends report, ICHRA adoption grew 34% among large employers and 52% among small employers year-over-year. Additionally, over the last five years, adoption has increased by more than 1,000%². Employers who made the switch in prior years aren't reversing course — they're refining their contribution strategies and getting better at communicating the benefit to employees. The stability of the class structure is a feature, not a limitation. It allows for long-term planning and reduces administrative burden year over year.

We continuously monitor regulatory updates and will notify you of any changes that could impact your ICHRA design.

Get expert help with ICHRA classes

Designing an optimal class of employees under ICHRA structure requires careful planning and strategic thinking. You'll need to consider your workforce composition, budget constraints, geographic spread, and recruitment goals. Take Command helps thousands of employers navigate these complex decisions. Our team of experts will:

• Analyze your current workforce to identify optimal class structures
• Ensure compliance with minimum class size requirements
• Design reimbursement levels that balance cost control with employee satisfaction
• Handle the administrative complexity of managing multiple
• ICHRA employee classes
• Provide ongoing support as your workforce evolves

Ready to create the perfect ICHRA classes for your organization? Our platform makes it simple to implement and manage even the most complex class structures.

For more assistance with ICHRA implementation, explore these resources →

• Learn about ICHRA Rules
• Learn about ICHRA Requirements 
• Learn about ICHRA Regulations
• Learn about ICHRA Plan FAQs
• Learn about our ICHRA Administration Platform

Frequently asked questions

Can I offer different ICHRA reimbursement amounts to different employee groups?

Yes, you can offer different reimbursement amounts to different ICHRA employee classes. The 11 approved classes include full-time, part-time, salaried, geographic location, and others. Within each class, all employees must receive the same offer, but you can vary amounts between classes. You can also adjust within classes based on age (up to 3:1 ratio) and family size. For 2026, the maximum reimbursement limits are $6,450/year for self-only and $13,100/year for family coverage.

What happens to an employee's ICHRA when they change from full-time to part-time?

When employees move between ICHRA classes, the transition depends on the reason for change. If it's a voluntary change (not termination or hour reduction), unused ICHRA funds can transfer to the new class. The employee may receive a different reimbursement amount based on their new class. If they lose ICHRA eligibility entirely, they may qualify for COBRA and will have a Special Enrollment Period to purchase individual insurance.

Do minimum class size requirements apply to all ICHRA classes?

No, minimum class sizes only apply when you offer both traditional group insurance and ICHRA to different employee groups. The minimums apply to five specific classes: full-time, part-time, salaried, non-salaried, and geographic rating areas smaller than a state. If you're offering only ICHRA (no group plan), there are no minimum class size requirements.

Can I create my own custom employee classifications for ICHRA?

You cannot create entirely new classifications, but you can combine any of the 11 approved ICHRA classes to create custom combinations. For example, you could create a class for "full-time salaried employees in California" by combining three existing classes. These combination classes must still follow all applicable rules, including minimum size requirements if you also offer group insurance.

How do I know if my 2026 ICHRA is ACA-compliant?

If you have 50 or more full-time equivalent employees, your ICHRA must meet the ACA affordability standard. For 2026, that means an employee's share of the lowest-cost silver plan premium, after your ICHRA contribution, cannot exceed 9.96% of their household income. Because most employers don't know their employees' household income, the IRS offers three safe harbor calculation methods (W-2 wages, rate of pay, and federal poverty line) that simplify the compliance check. Take Command can walk you through which safe harbor makes the most sense for your workforce.

References

1. HealthSherpa, Transaction Data, as reported by BenefitsPro, January 21, 2026. https://www.benefitspro.com/amp/2026/01/21/ichra-enrollment-nearly-triples-as-americans-shift-to-cash-for-coverage-plans/
2. HRA Council, "Growth Trends for ICHRA & QSEHRA, Vol. 4," June 2025. https://www.hracouncil.org/report