Permissible Employee Classes (ICHRA Classes)

Permissible Employee Classes: Customizing ICHRA Allowances Compliantly

Permissible Employee Classes are 11 federally recognized employee categories under 26 CFR 54.9802-4 that allow employers to customize ICHRA allowance amounts without violating ACA nondiscrimination rules. Standard classes include full-time, part-time, seasonal, salaried, hourly, temporary staffing, geographic rating areas, and employees covered under collective bargaining agreements.

The 11 Statutory Employee Classes

Under federal regulations, employers cannot arbitrarily create custom classes (such as distinguishing between departments or management levels). Instead, they must strictly choose from the 11 recognized statutory classes:

1. Full-Time Employees: Employees regularly working 30+ hours per week (or 130 hours per month).
2. Part-Time Employees: Employees working fewer than 30 hours per week.
3. Seasonal Employees: Workers hired for temporary positions typically lasting 6 months or less.
4. Employees Covered by a Collective Bargaining Agreement (Union): Workers subject to a negotiated union contract.
5. Employees in a Waiting Period: New hires undergoing an established ERISA waiting period (max 90 days).
6. Foreign Employees: Non-resident aliens with no U.S.-sourced income.
7. Employees in Different Geographic Rating Areas: Workers situated in distinct state insurance rating areas or worksite regions.
8. Salaried Employees: Exempt workers compensated on a fixed salary basis.
9. Non-Salaried / Hourly Employees: Non-exempt workers compensated on an hourly wage basis.
10. Temporary Agency Staffing: Workers supplied through a third-party temporary staffing agency.
11. Combinations of the Above: Blended classes, such as "Full-Time Salaried in California" vs. "Full-Time Hourly in Texas."

Minimum Class Size Requirements

To prevent employers from creating one-person classes targeting high-risk individuals, federal rules mandate a Minimum Class Size whenever an employer offers a traditional group health plan to one class and an ICHRA to another class:

• Fewer than 100 Employees: Minimum class size is 10 employees.
• 100 to 200 Employees: Minimum class size is 10% of total employees.
• More than 200 Employees: Minimum class size is 20 employees.

Note: Minimum class size rules do NOT apply if the employer offers an ICHRA to all employee classes without offering a traditional group plan.