# ICHRA Employee Classes: Rules, Minimum Sizes & Design

Canonical reader page: https://ichrareport.com/guides/employee-classes/

Publisher: ICHRA Report

Originally published: 2026-09-12

Substantively updated: 2026-09-19

Sources checked: Not recorded

Data period: Not recorded

[Home](https://ichrareport.com/) [Guides](https://ichrareport.com/guides/)  ICHRA Employee Classes: Rules, Minimum Sizes & Design

Plan-design guide

An employee class is a permitted category an employer can use when designing benefits, such as full-time or part-time employees. Learn which categories are allowed and what restrictions apply before offering different benefits to different groups.

CMS now calls an individual coverage HRA (ICHRA) a CHOICE Arrangement. [What changed with the CHOICE name?](https://ichrareport.com/guides/choice-arrangements/) ([CMS terminology](https://www.cms.gov/marketplace/employer-initiatives))

At a glance

Class source  **Federal rules**

Hybrid minimum  **10 / 10% / 20**

Same class choice  **Not allowed**

By [ICHRA Report](https://ichrareport.com/about/) · Published  September 12, 2026  · Updated  September 19, 2026

Direct answer

ICHRA employee classes let an employer offer the arrangement to defined groups of employees or combine ICHRA with a traditional group plan across separate permitted classes. The employer must use classes allowed by the federal rules, apply the same terms within a class subject to limited age and dependent variations, and follow minimum class-size rules when they apply.

## Why classes exist

Employee classes create a controlled way to reflect legitimate workforce differences without allowing an employer to steer individual high-cost employees away from a group plan. A class is a rules-based category, not a list of employees selected because of health status, expected claims, or personal preference. [source](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/) [source](https://www.irs.gov/irb/2019-28_IRB)

## Permitted class concepts

Federal guidance identifies classes based on job status and objective employment characteristics. Common examples include full-time, part-time, seasonal, salaried, non-salaried, employees covered by a collective bargaining agreement, employees who have not satisfied a waiting period, certain nonresident aliens with no U.S.-based income, and employees whose primary work locations fall within defined geographic areas. Permitted classes can be combined. Employers should use the complete regulatory list and qualified counsel when designing a nonstandard structure. [source](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)

**Employment status**  Full-time, part-time, or seasonal.

**Compensation basis**  Salaried or non-salaried.

**Bargaining status**  Employees covered by a particular collective bargaining agreement.

**Waiting period**  Employees who have not yet satisfied a permitted waiting period.

**Work location**  Employees whose primary sites of employment are in a permitted geographic area.

**Combined class**  A combination of two or more permitted class criteria.

## Same terms within a class

Employees in the same class generally must receive the ICHRA on the same terms. The employer can vary the amount based on age, subject to a maximum 3:1 ratio, and based on the number of dependents. Those variations should be written into the plan design and applied consistently. [source](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)

“Same terms” does not mean every employee receives the same dollar amount in all cases. It means the plan's eligibility and contribution rules operate consistently for everyone who shares the same class and relevant age or family tier.

## Using ICHRA with a group plan

An employer can offer a traditional group health plan to one permitted class and an ICHRA to another. It cannot offer employees in the same class a choice between the group plan and ICHRA. This boundary is central: classes divide benefit models; they are not a menu from which each employee selects the employer arrangement they prefer. [source](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)

When both benefit models are offered, minimum class-size requirements may apply to certain classes receiving ICHRA:

| Employer size | Potential minimum class size | Important boundary |
| --- | --- | --- |
| Fewer than 100 employees | 10 employees | These minimums generally matter when the employer offers a traditional group plan to some employees and ICHRA to others. If no traditional group plan is offered to any employees, these minimums do not apply. |
| 100–200 employees | 10% of total employees, rounded down | These minimums generally matter when the employer offers a traditional group plan to some employees and ICHRA to others. If no traditional group plan is offered to any employees, these minimums do not apply. |
| More than 200 employees | 20 employees | These minimums generally matter when the employer offers a traditional group plan to some employees and ICHRA to others. If no traditional group plan is offered to any employees, these minimums do not apply. |

## When do ICHRA minimum class sizes apply?

First check whether the employer keeps a traditional group health plan for another class. Then check the particular class receiving ICHRA. The 10 / 10% / 20 size thresholds are not a blanket minimum workforce requirement for offering ICHRA. These scenarios concern the federal ICHRA integration class-size rule; other plan and employer obligations still need review. [source](https://www.irs.gov/irb/2019-28_IRB)

Class-size decisions: conditional rules and invented headcounts

| Proposed design | Facts to check | Class-size result |
| --- | --- | --- |
| ICHRA only, no traditional group plan | The employer offers ICHRA and no traditional group health plan to any employees. | These minimum class-size requirements do not apply. Permitted classes, same terms and other rules still matter. |
| Salaried group plan; non-salaried ICHRA | Fictional employer expects 125 employees on the first day: 110 salaried employees get the group plan; all 15 non-salaried employees are offered ICHRA. Only 8 enroll. | 10% of 125 is 12.5, rounded down to **12** . 15 offered meets this class-size requirement; 8 enrolled is not the count used. |
| Same total workforce, a smaller non-salaried class | Alternative fictional split: 114 salaried employees get the group plan; 11 non-salaried employees are offered ICHRA. | 11 is below 12. This proposed class cannot be treated as separate under this size rule. Redesign the arrangement rather than selecting individual employees to move. |
| Full-time group plan; part-time ICHRA | The employer separates these two permitted statuses between the two benefit models. | The part-time class receiving ICHRA is subject to the applicable minimum. Being part-time does not automatically exempt it. |
| Geographic class covering an entire state | A class is based only on primary work sites in an entire state, with a group plan offered elsewhere. | The geography-only class has an exception from this minimum. A smaller geographic area or combination with another applicable class can change the result. |

For this test, the employer is the  **common-law employer** . Size is the workforce reasonably expected on the first day of the HRA plan year; the class count is the employees  **offered ICHRA on that first day** . It is not the prior-year full-time-equivalent calculation used to decide ALE status, and it is not actual enrollment. For employers with 100–200 employees, round 10% down to a whole employee. [source](https://www.irs.gov/irb/2019-28_IRB)

Combined classes need their own check. Combining an applicable class with another criterion generally brings the minimum along; the regulations specify exceptions, including the waiting-period combination. A geography-only exception should not be copied onto a salaried-plus-geography class. New-hire subclasses also have a separate rule. Read §54.9802-4(d)(3) and (d)(5) before applying an exception. [source](https://www.irs.gov/irb/2019-28_IRB)

## Can remote employees form their own ICHRA class?

**“Remote” by itself is not an enumerated ICHRA class.**  An employer can investigate permitted geographic classes based on primary sites of employment, or another permitted employment category. That requires actual work-site facts and a written definition; it cannot be a label used to move particular employees because their claims are expensive. [source](https://www.irs.gov/irb/2019-28_IRB)

For example, two people working from homes in different states do not automatically belong to one valid “remote worker” class. Determine their primary work sites, choose the permitted geographic boundary, check whether it covers whole states or smaller rating areas, and apply any combined-class and size conditions. Then check individual-market coverage and [affordability for the applicable plan year](https://ichrareport.com/guides/ichra-affordability-2027/#three-tests). A valid class does not by itself prove good coverage or employer compliance.

[Use the implementation checklist](https://ichrareport.com/guides/implementation-checklist/) to assign an owner for the class definition, roster, notice and enrollment process. For a different arrangement, read [ICHRA versus QSEHRA](https://ichrareport.com/hra/ichra-vs-qsehra/); do not transfer these ICHRA class rules to QSEHRA.

## Waiting periods and new hires

Employers can use a permitted waiting-period class and federal rules include special treatment for new hires. Operationally, the design must line up with eligibility dates, notice timing, individual-market special enrollment, payroll effective dates, and the date reimbursements can begin. A technically valid class can still fail if a newly eligible employee cannot obtain coverage in time.

## How to design classes from first principles

1. **Identify the business difference.**  Is the issue geography, worker status, bargaining agreement, or another permitted employment characteristic?
2. **Confirm the class is permitted.**  Do not invent a class because it produces the desired economic result.
3. **Test anti-selection risk.**  The design should not isolate individuals based on health, claims, age outside permitted variation, or expected cost.
4. **Apply minimum-size rules.**  Determine whether a traditional group plan remains available to another class.
5. **Model affordability by class.**  Different locations and age distributions can require different contributions.
6. **Document the rule.**  Eligibility systems, payroll, notices, and the administrator must all use the same class definition.

## Common class-design failures

**Creating a “high-cost employee” class**  Health status and expected claims are not permitted class criteria.

**Offering group or ICHRA choice within one class**  The employer must choose the benefit model for the class.

**Ignoring headcount minimums**  Hybrid group-plan/ICHRA designs may trigger class-size requirements.

**Using inconsistent HR data**  A class definition that payroll, HRIS, and the administrator interpret differently creates eligibility errors.

**Designing without employee-market analysis**  A geographically valid class may still face weak individual plan options.

## Frequently asked questions

### Can an employer create any employee class it wants?

No. The class must be based on a category permitted by the federal ICHRA rules.

### Can full-time employees get a group plan while part-time employees get ICHRA?

Yes, that is a common example of using separate permitted classes, subject to the applicable rules and minimum class sizes.

### Can employees in the same class receive different amounts?

The plan may vary contributions by age within a 3:1 ratio and by number of dependents. Other differences require careful regulatory review.

### Do minimum class sizes always apply?

No. HealthCare.gov states that the minimums do not apply when the employer does not offer a traditional group health plan to any employees.

## Sources and evidence

[1 HealthCare.gov — Individual Coverage Health Reimbursement Arrangements Federal overview of ICHRA contributions, employee classes, class-size minimums, affordability, and implementation timing. Source reviewed 2026-09-11](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)[2 Internal Revenue Service — Internal Revenue Bulletin 2019-28 — HRA integration final rules Primary regulatory text for ICHRA notice timing, individual-coverage substantiation, classes, and opt-out rules. Source reviewed 2026-08-16](https://www.irs.gov/irb/2019-28_IRB)

Review dates are recorded for each source above. Company pages are useful for confirming how a product is described, but they do not prove service quality or customer results.

## These class rules are specific to ICHRA

QSEHRA has different eligibility and same-terms requirements. Do not transfer ICHRA class rules to a QSEHRA.

[Read the HRA guide](https://ichrareport.com/hra/ichra-vs-qsehra/)