The individual coverage HRA (ICHRA) brings with it a greater degree of flexibility and customization for business owners, especially those looking to offer different types of benefits to different types of employees (i.e., salary vs hourly). While the hallmark classes of ICHRA are a huge bonus, it's important to understand how minimum class requirements and ICHRA go together.
So how does it work and what’s required? Let’s break it down.
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, which 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.
If your company includes less than 100 employees, your class size minimum is 10. For businesses with 100-200 employees, the requirement is 10% employees rounded down to whole number, and 200 employees or more have a minimum class size of 20.
A few other class size notes:
- Combo Classes: Minimum class size applies to any combo-classes that include one of the classes listed above unless it’s a combo with the waiting-period class, in which case there is no restriction
- Rating Area Classes: Minimum class sizes only apply to rating areas smaller than a state. For example, if you or your client has one employee in a remote state, you could have a class of one without violating the rules. However, if you’re using a narrower rating area design (typically at the “county” level) then minimum class sizes apply.
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.
What if you’re not sure how many employees will be in one class or another? Minimum class size is based on a reasonable estimate at the start of the plan year. Employers will want to document and demonstrate reasonable assumptions when designing their plan that they will meet minimum class sizes. If at the end of the year, actual participation in a class dipped below the minimum, the employer will want to make changes to their ICHRA to boost participation.
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