An effective ICHRA design starts with understanding how the employer’s workforce is structured. Employee location, employment status, class eligibility, and workforce changes can all affect how the arrangement is designed and administered.
Understand the Workforce Structure
Before establishing employee classes or allowance amounts, the employer should review the characteristics of its workforce.
Full-time and part-time employees
Salaried and hourly employees
Seasonal employees
Employees working in different rating areas
Employees covered by collective bargaining agreements
Employees in different geographic locations
New hires, rehires, leaves of absence, and terminations
Expected workforce growth or expansion into new states
A clear workforce picture helps reduce unnecessary complexity when the ICHRA is designed.
Use Permitted Employee Classes
ICHRA rules allow employers to distinguish between certain categories of employees when structuring eligibility.
Class design should reflect permitted employment distinctions rather than individual health conditions, expected medical needs, or an employee’s choice of insurance plan.
Depending on the employer’s structure, permitted classes may include distinctions such as full-time and part-time status, salaried and hourly status, seasonal status, employees whose primary site of employment is in the same rating area, and employees covered by a collective bargaining agreement.
When an employer offers an ICHRA to certain employee classes and a traditional group health plan to others, minimum-class-size requirements may apply to certain class structures. For full-time and part-time classes specifically, the minimum-class-size requirement applies only when one of those classes is offered the traditional group health plan and the other is offered the ICHRA, and it applies only to the class offered the ICHRA.
Keep the Design Practical
A workforce may technically support several employee classes, but additional complexity is not always beneficial.
Fewer clearly defined classes may make eligibility, employee communication, allowance administration, and ongoing workforce changes easier to manage. More detailed class structures may be appropriate when meaningful differences exist across locations or workforce groups.
The objective is to create a structure that reflects the employer’s workforce while remaining understandable and administratively workable.
Plan for Workforce Changes
Workforce design should also account for changes that occur during the plan year.
New hires, changes in employment status, transfers between work locations, leaves of absence, returns to work, and other employment changes may affect an employee’s class or eligibility.
Class definitions and related plan terms should therefore be documented clearly enough to support consistent administration when employee circumstances change.
Coordinate Workforce Design With the Broader ICHRA Strategy
Employee classes do not operate independently from the rest of the arrangement. Workforce design can affect allowance amounts, affordability analysis, employee communications, enrollment, and ongoing administration.
For Applicable Large Employers, workforce structure may also affect how affordability is evaluated across the employee population.
Related guidance may include Strategy, Employee Class Design, and Allowances.
Lirvion provides administrative and educational support and does not provide legal or tax advice. Employers remain responsible for employee-classification and plan-design decisions and should consult qualified legal, tax, or benefits professionals regarding the application of ICHRA rules to their workforce.