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

Yes—you can offer an Individual Coverage HRA (ICHRA) to one group of employees and a traditional group health plan to another. This is often referred to as a “carve out” strategy.

However, there are a few important rules to keep in mind:

1. Minimum group size requirement

If you’re offering both options, the group enrolled in the ICHRA and/or the traditional plan must include at least 10 employees.

2. Employee classes/groups must be distinct

Employees must be separated into clearly defined, employee classes or groups—such as full-time vs. part-time or salaried vs. hourly.

• You can’t offer a choice between ICHRA and a group plan to employees within the same class.
• Each class must receive only one type of benefit.

3. Company size limit (platform requirement)

To ensure compliance with our ICHRA platform, your clients should have fewer than 50 employees. Applicable Large Employers (ALEs), which are businesses with 50 or more full-time employees, face extra compliance rules. Please note that it's the client's responsibility to confirm they are under this employee threshold.

One important caveat: if the owners are not W-2 employees—such as S-Corp owners or partners—they typically can’t participate in an ICHRA. In that case, it’s okay for eligible employees to receive the ICHRA while the owners keep separate traditional health coverage for themselves. Since the owners aren’t eligible for the ICHRA in the first place, that setup generally isn’t considered a carveout.

If you wish to go this route, reach out the StretchDollar team at Support@StretchDollar.com to make sure that you've checked all the compliance boxes.