What Is an ICHRA Class

Understand ICHRA employee classes, compliance rules, and how to structure benefits across different groups

An ICHRA class is a defined group of employees to whom employers may offer an ICHRA. Classifying employees allows employers to offer ICHRAs to some groups of employees while excluding others and to provide different levels of ICHRA benefits to different groups. Employers create these classes using one or more permitted categories and must follow specific rules to maintain compliance. Below are the key characteristics of ICHRA classes.

Distinct Employee Groups

ICHRAs are offered to employees grouped into distinct, non-overlapping classes based on their inclusion or exclusion from the following permitted categories: Permitted categories include:

Full-time employees
Part-time employees
Salaried employees
Non-salaried employees
Employees within the same geographic rating area
Seasonal employees
Employees who have not satisfied a waiting period for coverage.
Employees covered by collective bargaining agreements
Nonresident aliens without U.S.-based income
Temporary employees placed at unrelated entities
Employers may also create combined classes, such as full-time employees in a specific geographic area.

Uniform Terms Within Classes

ICHRA benefits must be offered on the same terms and conditions to all employees within a class. Variations are only allowed based on:

Age: Older employees may receive a higher benefit, up to three times the amount offered to the youngest participant.
Family size: Benefits can vary depending on the number of covered dependents.

Group Health Plan Restrictions

Employers cannot offer both a traditional group health plan and an ICHRA to the same class of employees. However, a special rule allows offering a group plan to existing employees while providing an ICHRA to new hires starting after a specified date.

Special Rules for New Hires

Employers may offer an ICHRA to new hires in a class while continuing a traditional group health plan for existing employees. The new hire subclass must follow the same terms and conditions and may include a prospective start date. This subclass can be discontinued, but subsequent re-application of the rule must also be prospective.

Group Health Plans Invokes Minimum Class Sizes

When offering ICHRAs alongside group health plans to different classes, minimum class size requirements may apply to prevent adverse selection. These requirements depend on the total number of employees and are determined at the start of the plan year:

Employers with fewer than 100 employees: Minimum of 10 employees in the class.
Employers with 100–200 employees: At least 10% of total employees.
Employers with more than 200 employees: Minimum of 20 employees.

Class Definitions at the Employer Level

Employee classes are defined at the common-law employer level, allowing flexibility across related entities. Each employer in a controlled group may set its own class definitions.