Setting the Allowance

A practical guide to setting up your HRA allowance, including structure options, legal limits, and how Salusion calculates compliant amounts for your workforce.

How HRA Allowances Work

When you set a monthly allowance, you are setting a maximum annual benefit that becomes available in monthly increments.

For example:

If your HRA begins in January with a $400 monthly allowance, the employee has $400 available on January 1. If no expenses are submitted in January, $800 is available on February 1.

If the employee then submits a $1,000 expense in mid-February, we reimburse $800 — the amount that has accrued at that time. The remaining $200 is automatically reimbursed in March, once another $400 becomes available.

Allowances continue to accrue each month until the plan year reaches its maximum annual benefit. Reimbursements are always limited to the amount available at the time an expense is processed.

At the end of the plan year, employees have a 75-day runout period to submit expenses incurred during that plan year. After the runout period ends, any unused balance from that plan year expires.

Allowance Structure Options

One Size Fits All

Under this structure, every eligible employee receives the same monthly allowance (or, for an ICHRA, every eligible employee within the selected class).

Limits:

QSEHRA: Because the allowance does not vary by family size, it must stay within the self-only annual cap. For 2026, that equals $537.50 per month (annual $6,450)
ICHRA: There is no annual dollar cap.

By Family Size

Under this structure, the monthly allowance varies based on the number of covered individuals in the household.

Salusion calculates the total monthly allowance using the spouse and dependent information entered during insurance validation.

Enter the following amounts:

Employee amount
First dependent amount (spouse or child)
Each additional dependent amount

If you want only two tiers — single employees and employees with families — enter $0 for each additional dependent.

Limits

QSEHRA:
- Self-only cannot exceed $537.50 per month ($6,450 annually).
- Family coverage cannot exceed $1,091.66 per month ($13,100 annually).
- These limits apply to HRA plan years that begin in 2026. If the calculated family amount exceeds the permitted maximum, it is reduced to the allowed limit.
ICHRA: No annual dollar cap.

Example:

If you enter:

Employee: $500
First Dependent: $350
Each Additional Dependent: $150

The calculated allowances would be:

Employee only: $500
Employee + 1 dependent: $850
Employee + 3 dependents:
- Under an ICHRA, the full $1,150 would apply.
- Under a QSEHRA, the allowance is capped $1,091.66

By Age

Under this structure, the monthly allowance varies based on the employee’s age.
You may enter a different monthly amount for each age from 21 through 64.

Employees under age 21 receive the 21-year-old amount.
Employees age 65 or older receive the 64-year-old amount.
Allowances may increase with age but cannot decrease.
The highest allowance cannot exceed three times the lowest allowance.

Limits:

QSEHRA: Because the allowance does not vary by family size, it must stay within the self-only annual cap. For 2026, that equals $537.50 per month (annual limit $6,450.00)
ICHRA: There is no annual dollar cap.

By Age & Family Size

Under this structure, the monthly allowance is determined using the employee’s age and the number of covered dependents entered during insurance validation.

For each age from 21 through 64, you enter three monthly amounts:

Employee (self-only)
First dependent (spouse or child)
Each additional dependent

When an employee completes insurance validation, Salusion calculates their total monthly allowance for that employee’s age by adding:

Employee amount
First dependent amount (if applicable)
Each additional dependent amount (if applicable)

If you want only two tiers — self-only and family — enter $0 for each additional dependent.

Age Rules

These rules apply separately to each category (Employee, First Dependent, and Each Additional Dependent):

Employees under age 21 receive the 21-year-old amounts.
Employees age 65 or older receive the 64-year-old amounts.
Amounts may increase with age but cannot decrease.
Within each category, the highest amount cannot exceed three times the lowest amount.

Limits

QSEHRA: The total monthly allowance (employee plus dependents) must remain within the applicable annual cap. For plan years beginning in 2026:
- Self-only: $537.50 per month ($6,450 annually)
- Family: $1,091.66 per month ($13,100 annually)
ICHRA: No annual dollar cap.

Percentage of Insurance Cost (ICHRA only)

Under this structure, the monthly allowance is calculated as a percentage of the average Marketplace premium for a selected metal level.

You will select:

A metal level (Bronze, Silver, or Gold)
A percentage of the plan cost to cover

For each employee, Salusion:

Identifies the average premium

We determine the average premium for the selected metal level based on:

The employee’s site of employment
The employee’s age

Applies your selected percentage

We multiply that premium by the percentage you selected to calculate a preliminary monthly allowance.

Test for ACA affordability

We compare the resulting allowance against the Lowest-Cost Silver Plan (LCSP) and apply the same ACA affordability calculation described in the next section.
If the calculated allowance would not make the LCSP affordable, the allowance is automatically increased to the minimum amount required to satisfy ACA affordability.

As a result, allowances calculated using this method will always meet ACA affordability standards.

Calculate the Allowance for Your Workforce

Because allowances under this method vary by age and site of employment, the exact monthly amounts depend on your employee census. To see the precise allowance amounts for your business:

Click the Allowance Calculator link.
Upload your employee census using the provided template.
Salusion will calculate the monthly allowance for each employee automatically.

This allows you to review the exact amounts before finalizing your plan design.

Lowest Cost, ACA-Affordable (ICHRA only)

When you select this option, Salusion automatically calculates an allowance designed to meet the ACA affordability standard.

For each employee, we:

Identify the Lowest-Cost Silver Plan (LCSP)

We determine the lowest-cost Silver plan available to the employee based on:

The employee’s site of employment
The employee’s age

Using the site of employment is a permitted geographic safe harbor and allows affordability to be applied consistently across the employee class.

Determine the maximum affordable employee contribution

Using the Federal Poverty Level (FPL) safe harbor, we calculate the maximum amount the employee is permitted to pay for coverage.

This amount is determined by multiplying the Federal Poverty Level for a single individual (expressed as a monthly amount) by the ACA affordability percentage for the applicable year.

This produces a fixed monthly contribution that satisfies ACA affordability without relying on wage data.

Set the allowance

The monthly allowance is calculated as:

Lowest-Cost Silver Plan premium
minus
Maximum affordable employee contribution

The result is a monthly allowance that meets ACA affordability requirements using IRS-permitted safe harbors and is applied automatically for each employee based on age and location.