ICHRA Employee Classes
One of ICHRA's most powerful features is the ability to offer different reimbursement amounts — or no benefit at all — to different classes of employees. The IRS defines 11 permitted employee classes. Employers can offer an ICHRA to one class and a group health plan to another, as long as the classes are properly defined and meet minimum size requirements.
Why the class structure matters
The employee class rules exist to prevent employers from using ICHRA to steer less healthy employees away from the group health plan. Without class size minimums and defined class categories, an employer could theoretically offer a generous group plan to healthy employees and a minimal ICHRA to employees with high medical needs — effectively segmenting the risk pool.
The IRS addressed this by requiring that when an employer offers both a group plan and an ICHRA, the ICHRA class must meet a minimum size threshold. This ensures that class distinctions reflect genuine workforce segmentation — full-time vs. part-time, salaried vs. hourly, geographic location — rather than health status discrimination.
For employers who want to offer ICHRA to their entire workforce (no group plan), the class rules are less restrictive. The minimum class size requirements only apply when the employer is simultaneously offering a group health plan to a different class.
The 11 permitted ICHRA employee classes
Employers must use one or more of these IRS-defined classes when designing their ICHRA. Classes cannot be defined by job title, department, or any other criterion not on this list.
Minimum class size requirements
When an employer offers a group health plan to one class and an ICHRA to another class, minimum class size rules apply to prevent employers from using class distinctions to steer less healthy employees away from the group plan. These minimums apply to the following classes when used alongside a group plan: full-time, part-time, salaried, non-salaried, and geographic location. They do not apply to seasonal, CBA, waiting period, non-resident alien, or former employee classes.
| Employer size | Minimum class size |
|---|---|
| Fewer than 100 employees | 10 employees |
| 100–200 employees | 10% of total employees |
| More than 200 employees | 20 employees |
Reimbursement variation within a class
Within a class, employers can vary the reimbursement amount based on two factors only: age and family status.
For age variation, older employees can receive up to 3x the reimbursement of younger employees — mirroring the ACA's age-rating rules for individual market plans. This is important because individual plan premiums increase significantly with age, and a flat reimbursement amount may be meaningful for a 25-year-old but inadequate for a 60-year-old in the same class.
For family status, employees with dependents can receive higher reimbursements than single employees. The employer sets the differential — there is no IRS-mandated ratio for family vs. single reimbursements.
Employers cannot vary reimbursements within a class based on health status, claims history, job performance, tenure, or any other factor not listed above. Any such variation would violate the nondiscrimination rules and could disqualify the ICHRA's tax-favored status.
Common class design mistakes
Continue learning about ICHRA
Model reimbursement amounts by employee class and check ACA affordability for each group.
Evaluate your ICHRA class design against compliance requirements.
Next step
Model ICHRA reimbursements by employee class
Use the free ICHRA calculator to model reimbursement amounts by class and check ACA affordability for each group before committing to a plan design.