ICHRA

How do ICHRA classes work?

by Ali

 

* Updated June 19, 2019 after the passage of the final regulations*

With the Individual Coverage HRA which starts January 1, 2020, employers can reimburse employees tax-free for individual health insurance and medical expenses. The classes enable employers to have the flexibility they need to design a benefit within budget while retaining and recruiting quality employees. 

 

ICHRA classes

To help employers prioritize their health benefits budget, employee classes separate employees into groups by legitimate job-based criteria like hours worked or location. The nice thing about ICHRA is that you can combine it with a traditional group health plan. Employers may offer one class of employees a group health plan and another class of employees an ICHRA. The only caveat is that employers cannot offer employees in the same class (say Full-time employees) the choice between a traditional group health plan or ICHRA. Each class needs to have only one benefit offering. 

The ICHRA classes are as follows:

  • Full-time employees
  • Part-time employees
  • Seasonal employees
  • Employees covered under a collective bargaining agreement
  • Employees in a waiting period
  • Foreign employees who work abroad
  • Employees working in the same geographic location (same insurance rating area, state, or multi-state region)
  • Salaried workers
  • Non-Salaried workers (such as hourly workers)
  • Temporary employees of staffing firms
  • A combination of two or more of the above

The amounts offered to employees can be increased within each class based on either age or number of dependents. 

ICHRA will also feature a new hire rule which allows employers to offer new employees an Individual Coverage HRA while grandfathering existing employees in a traditional group health plan. 

Minimum Class Size Requirements

Employers who plan to offer a traditional group health plan to at least one class of employees and an Individual Coverage HRA (ICHRA) to another class of employees will need to keep in mind the minimum class size requirements. These requirements were put in place to prevent the individual market from being saturated with high risk individuals. 

Minimum class size requirements apply to the following classes:

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

The minimum number of employees to be included in a class ultimately depends on the size of the employer based off the employee count on the first day of the plan year. 

 

Class size minimum Size of employer
10 less than 100 employees
10% employees rounded down to whole number 100-200 employees
20 200+ employees

About Take Command Health

Take Command Health is a recognized leader in QSEHRA administration and small business HRA tax strategy. We were at the forefront of the new ICHRA administration regulations and  responded with our own comprehensive and exclusive research to the proposed regulations. In addition, we  were the only HRA provider invited to Washington when the new regulations were passed. Our team is passionate about HRA's and the impact they can have on small business. 

Is your company or client going to be a part of this exciting change? Chat with our team with any questions you may have about these new, tax-friendly benefits or check out our new ICHRA Guide for more information on its background, setup process, requirements, and rules. 

Contact us

 

Picture of Ali

Hi, I'm Ali! I wrote this blog because I love helping people decode confusing insurance jargon and understand the fine print. I'm a licensed health insurance professional and specialize in simplifying health insurance for individuals and small businesses. My QSEHRA articles have been featured regularly on Accounting Today, Accounting Web, HRWeb, and other industry publications. I'm also a member of Take Command Health's client success team and a full-time mom. Learn more about me and connect with me on our about us page. Thanks!