ICHRA in brief
How an ICHRA allowance works: capped cost, classes, the affordability test and what it takes to set one up.
An allowance instead of a plan
- With an ICHRA, you give each employee a fixed monthly amount, tax-free, toward an individual plan they choose.
- They buy coverage on their own; you reimburse up to the allowance.
Your cost is capped
- You never pay more than the allowance, whatever plan an employee picks.
- There’s no minimum share of employees who must take part.
Same terms within a class
- Everyone in a class (such as full-time or part-time, salaried or hourly) gets the same amount.
- The amount can rise with family size, and with age up to three times as much for the oldest.
The affordability test
- If what’s left for an employee to pay for the cheapest Silver plan is low enough, the allowance counts as affordable.
- Then the employee can’t also get a premium tax credit. With 50 or more full-time employees, affordability also matters for IRS penalties.
Setting one up
- You need plan documents and a written notice to employees at least 90 days before it starts.
- An ICHRA administrator usually handles both, through your agency.
Prices for your team, soon
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