What are minimum class sizes and are they relevant when offering an ICHRA?
Here's another great thing about offering an ICHRA! Individual Coverage HRA's allow employers to freely class employees even if there is only one employee in that class…most of the time. That is true except when employers offer both a traditional group plan and an ICHRA to another class of employees. When that happens the employer must keep in mind the minimum class size requirement. The requirements apply to only the following classes:
- Full-time
- Part-time
- Salaried
- Non-salaried
- Employees in the same geographic rating area
The minimum class requirements vary depending on the size of the employer. There is a minimum participation requirement of 10 employees for employers with up to 100 employees. If there are 100-200 employees, you take 10% of the total number and round it down to the nearest whole number. For employers with over 200 employees, the minimum class size is 20 employees. Employers can offer an ICHRA to new hires without minimum class requirements and “phase out” their traditional group plan. Another good thing to note is an ICHRA can be offered to employees in a different state without any minimum class size requirements even if a traditional group plan is offered to the other employees. Here's a summary of the minimum class sizes:
- If the employer has less than 100 employees → the minimum class size is 10
- If the employer has 100 to 200 employees → the minimum class size is 10% of all employees
- If the employer has more than 200 employees → the minimum class size is 20
Again, an employer should note, these requirements only apply when the employer offers ICHRA to one class and traditional group coverage to another class. Even then, the requirements only apply to the 5 classes listed above. This is great news for any employer offering an ICHRA!