Can I offer ICHRA to some employees and a traditional plan to others?

Yes, employers can offer both traditional group health insurance and an Individual Coverage Health Reimbursement Arrangement (ICHRA) to their employees, but there are two important stipulations.

First, all employees within the same "class" must be offered the same type of benefit. You can think of employee classes as distinct groups, such as:

• Full-time employees
• Part-time employees
• Salaried employees
• Hourly employees

Employees in different geographic locations

Some classes can be offered group health insurance, while others are offered an ICHRA. However, you cannot allow individuals within the same class to choose between the two options.

For example, a permissible structure would be:

• Managers: Offered group health insurance
• Hourly workers: Offered an ICHRA

Second, if you offer different benefits to different classes (and the distinction is not based on geography), each class must meet a minimum size requirement. Generally, there must be at least 10 employees in each class.

Example Scenarios:

Not Permitted:

• 8 managers are offered group insurance.
• 5 hourly workers are offered an ICHRA.

(Reason: The ICHRA class has fewer than 10 employees).

Permitted:

• 11 managers are offered group insurance.
• 15 hourly workers are offered an ICHRA.

(Reason: Both classes meet the minimum size of 10+ employees).

Permitted (Geographic Exception):

• Employees at the Austin, TX location are offered group insurance.
• Employees at the New York City, NY location are offered an ICHRA.

(Reason: The minimum class size rule does not apply when classes are based on geographic location).

Important Note: Your ICHRA provider is not responsible for compliance reporting if your company becomes an Applicable Large Employer (ALE), defined as having more than 50 full-time equivalent employees, while offering both group health insurance and an ICHRA. This may subject your company to additional compliance and reporting requirements.