Are S-corp owners or partners eligible for ICHRA? How does that work?

It depends on the ownership structure. In general, S-corp owners with 2% or more ownership and partners in a partnership aren't  eligible for tax-free ICHRA distributions in the same way as regular W-2 employees.

For S-corp owners, health insurance premiums are often handled through owner compensation and deducted on their personal tax return in a more tax-advantaged way. Receiving tax-free ICHRA reimbursements on top of that could create a “double-dipping” tax advantage.

Partnerships are also treated differently. The IRS generally doesn't consider partners to be common-law employees, so they typically aren't eligible to participate as employees under an ICHRA.

What this means in practice:

• ICHRA is a great solution for eligible W-2 employees.
• Owners often offer the benefit to staff even if they can't participate in the same way.

• Some family members of owners may also be impacted if they also own more than 2% of the company

  
  

Best next step: Confirm how the business is taxed (S-corp, partnership, LLC, etc.) and review owner participation goals before quoting.