Employee classes are part of the magic of the individual coverage health reimbursement arrangement (ICHRA). With ICHRA, employers can design unique benefit solutions to fit their workforce by dividing employees into groups or classes. One of the 11 classes is the Collective Bargaining Agreement (CBA) class. If you or your client have employees covered under CBAs, you'll need to brush up on this topic before you design your HRA.
What is a Collective Bargaining Agreement?
A collective bargaining agreement includes employees who have a written agreement between an employer, employee, and their trade union on the basis of employment, pay rate, work hours, and other working conditions.
Do individuals covered under a Collective Bargaining Agreement qualify as their own ICHRA class?
Yes, employers may establish separate classes for employees covered by CBAs.
For employers with multiple collective bargaining agreements, each one qualifies as a separate class under ICHRA.
An employer can combine a CBA classification with other permitted classes of employees (for example, combining the CBA class with the full-time employee and part-time employee classes to create full-time and part-time CBA subclasses).
Let's say your company has a group of employees that are governed by 2 separate CBAs. Under the ICHRA rules, you can specify different reimbursement rates for the members of CBA #1 and CBA #2. You are not permitted to further break up the CBA #1 group by creating a class of male members and female members. You are, however, permitted to further break out CBA #1 by using one of the ICHRA permitted classes like full-time / part-time employees. So you can have different rates for full-time employees of CBA #1 and part-time employees of CBA #1.
How do ICHRA classes work?
Benefits have to be distributed fairly to employees that fall within each class, but each class can be broken down further by age and family size. That means that employees with families can be offered a higher amount per month and rates can be scaled by age. This makes sense given that family health expenses cost more than singles, and health insurance costs rise with age.
Other ICHRA classes to keep in mind
- Full-Time Employees
- Part-Time Employees
- Seasonal Employees
- Employees who have not satisfied a waiting period for coverage
- Salaried Employees
- Non-Salaried Employees
- Temporary employees of staffing firms
- Non-Resident aliens with no US-based income
- Employees in the same geographic rating area
- Any combination of two or more classes from above.
What comes next?
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Take Command Health, the number one small business HRA administration provider, estimates that as many as 50 million employees and family members could participate in an ICHRA in the coming years. We wrote the ICHRA Guide, and compiled ICHRA FAQs to help you understand this new tax advantaged tool.