ICHRA Employee Classes and Why They Matter

As a way to promote equity among employees regarding health plans, ICHRA allows you to separates employees into groups based on job-based criteria. You can create different funding strategies for these different groups. In this article, we go over the different types of ICHRA employee classes and why they matter.

11 Employee Classifications

Full-time employees

Full-time employees are those who work the standard number of hours defined by the employer, typically 30 or more hours per week. This ICHRA class allows businesses to offer health reimbursement arrangements to employees who work full-time, differentiating them from part-time or temporary workers. Employers may offer distinct benefits to this group based on their full-time employment status.

Part-time employees

Part-time employees work fewer hours than full-time staff, often defined as less than 30 hours per week. Employers can create an ICHRA class specifically for part-time workers, offering them tailored benefits based on their limited work schedule. This flexibility allows businesses to align health benefits with employment status without having to extend full-time benefits.

Seasonal employees

Seasonal employees work for a limited period during specific times of the year, often in industries like retail or agriculture. Employers can create an ICHRA class for this group to provide health benefits during their employment season. This class ensures that temporary, seasonal staff receive appropriate health coverage while they are actively working.

Employees covered by a Collective Bargaining Agreement

This class includes employees whose employment terms are governed by a collective bargaining agreement (CBA), negotiated between the employer and a labor union. The ICHRA offered to these employees is often shaped by the stipulations of the CBA, ensuring that the health reimbursement arrangements align with union-negotiated benefits.

Employees who have not satisfied a waiting period

Employees not in a waiting period have completed any necessary probationary period and are now fully eligible for their employer’s health benefits. This ICHRA class includes workers who can access full health reimbursement arrangements without delay, ensuring they receive their allotted benefits as active employees.

Nonresident aliens with no U.S.-based income

This ICHRA class applies to nonresident aliens who are employed by a U.S.-based company but do not earn any income from U.S. sources. These employees typically live and work abroad, and as nonresidents for tax purposes, they are exempt from certain U.S. tax regulations, including the requirement to have U.S. health coverage.

Employees working in the same rating area

Employees in different geographic locations can be categorized into separate ICHRA classes based on where they work. This is particularly useful for companies with offices or workers in multiple states or regions, allowing them to offer health reimbursement plans that consider local health care costs or insurance market differences.

Salaried employees

Salaried employees are compensated with a fixed annual income rather than hourly wages. They typically hold exempt positions and may have different benefits needs compared to hourly workers. Employers can create a separate ICHRA class for salaried employees, offering them specific reimbursement arrangements that align with their compensation structure.

Non-salaried employees (e.g. hourly)

Hourly employees are paid based on the number of hours they work. Employers may create a distinct ICHRA class for hourly workers, allowing them to provide health benefits that match the needs of employees with fluctuating work hours. This class is useful for businesses with a mix of salaried and hourly workers, enabling tailored health benefits.

Temporary employees of a staffing firm

Temporary employees, who are hired on a short-term or project-based basis, can be placed in their own ICHRA class. Employers can offer health reimbursements specific to these employees, acknowledging the temporary nature of their employment while still providing access to health benefits during their tenure.

Here’s How It Works

‍You are a larger company headquartered in California with a large workforce that’s now remote. Previously, it was difficult to offer group health to your remote workers because unless you offer a national group health plan, which can be more expensive for you, your remote workers would have to pay more due to possibly being “out of network.”

Now, you decide to offer an ICHRA. Now, your employees have the option to buy the best health plan in their respective markets. This approach saves you money because you don’t have to buy an expensive multi-state, national group health plan. The best part? Your employees can tap into the best local health providers in their community.

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Here's another great guide about demystifying ICHRA classes.