ICHRA Employee Classes and Minimum Class Sizes, Explained

Employee classes are the feature that lets an ICHRA fit real workforces. They let an employer give different allowances to different groups, or offer a traditional group plan to some employees and an ICHRA to others. They're also where most design mistakes happen.

With notices for January 1, 2026 plan years due by October 3, this is the moment to get class design right.

The ground rules

Under the 2019 final rule:

• Same terms within a class. Everyone in a class must be offered the ICHRA on the same terms. The only permitted variations are increases based on age (the oldest participant's amount can't exceed three times the youngest's) and on the number of dependents covered.
• One type of offer per class. An employer can't offer both a traditional group health plan and an ICHRA to the same class. It can offer a group plan to one class and an ICHRA to another, or offer nothing to some classes.
• Classes are defined in the plan document before the plan year begins and apply for the whole plan year.

The 10 permitted classes

1. Full-time employees
2. Part-time employees
3. Seasonal employees
4. Employees covered by a collective bargaining agreement
5. Employees who haven't satisfied a waiting period
6. Nonresident aliens with no U.S.-source earned income
7. Salaried employees
8. Non-salaried (for example, hourly) employees
9. Employees whose primary site of employment is in the same rating area (the geographic class)
10. Temporary employees of staffing firms placed at unrelated entities

The proposed version of the rule also included employees under age 25, but that class was dropped from the final rule, so it isn't available.

Employers can combine classes, for example "full-time salaried employees in rating area 3," and the combination becomes its own class. For full-time, part-time, and seasonal status, the employer chooses whether to use the definitions from the employer shared responsibility rules (section 4980H) or the self-insured nondiscrimination rules (section 105(h)), and applies that choice consistently.

When minimum class sizes apply

The minimum class size rule exists to stop employers from moving a handful of high-cost employees off a group plan and into the individual market. It applies only when both of these are true:

• The employer offers a traditional group health plan to at least one class and an ICHRA to at least one other class, and
• The ICHRA class is based on full-time, part-time, salaried, or non-salaried status, or is a geographic class smaller than a state (alone or combined with other classes).

The minimum size of each such ICHRA class, determined at the start of the plan year based on the number of employees the employer reasonably expects to employ on that day:

Two refinements: full-time and part-time classes are subject to the rule only when one of them is offered the group plan and the other the ICHRA, and a geographic class isn't subject if it's defined by an entire state or a combination of entire states. If the employer offers only ICHRA (no traditional group plan to anyone), the minimum class size rule doesn't apply. Classes such as seasonal, collectively bargained, or waiting-period employees aren't subject to it on their own, though combining them with a class that is subject can bring the rule into play.

The new-hire subclass

An employer can offer an ICHRA to employees in a class who are hired on or after a future date, while current employees in that class stay on the traditional group plan. That's a common way to transition gradually. The new-hire subclass isn't subject to the minimum class size requirement. If the employer later subdivides it using one of the permitted classes, the minimum class size rule can apply to the resulting classes. And the new-hire rule can't be used to give different ICHRA amounts to employees in a class that is already offered an ICHRA.

Design examples to test against

These are hypothetical designs to illustrate the rules:

• A 60-employee company offers ICHRA to all full-time employees and nothing to part-timers. No group plan is offered to anyone, so minimum class sizes don't apply.
• A 150-employee company offers a group plan to salaried staff and ICHRA to 12 hourly employees. That hourly class is subject to the minimum class size: 10% of 150 is 15, so 12 is too small.
• A 300-employee company with two offices in different states offers a group plan at headquarters and ICHRA to the 25 employees at a branch in another state. A geographic class based on a whole state isn't subject to the minimum size; one based on a rating area smaller than a state would need at least 20.

Notices and special enrollment

The ICHRA notice must go to eligible employees at least 90 days before the plan year starts (October 3 for a January 1 plan year). Employees who become eligible later, and employers established less than 120 days before the plan year, can provide the notice by the date coverage can begin. The Department of Labor publishes a model notice that covers the required content.

Employees who newly gain access to an ICHRA qualify for a special enrollment period in the individual market. They generally need to enroll within 60 days, and the timing determines when coverage starts, so coordinate the plan's effective date with that window.

A design checklist

1. Confirm whether any class will receive a traditional group plan.
2. List each class and whether the minimum size rule applies.
3. Count expected employees in each class as of the first day of the plan year.
4. Set allowances by class, with any age or family-size variation.
5. Write the classes into the plan document.
6. Deliver notices on time.

Classes give ICHRA its flexibility. Getting them right on paper is what keeps that flexibility from becoming a compliance problem.