# ICHRA

> The individual coverage HRA: any size, no federal cap, classes of employees, and why it counts as an offer of coverage.

Source: https://lopifi.com/learn/qsehra-vs-ichra/ichra-explained
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**What is an ICHRA and how does it work?** The individual coverage HRA: any size, no federal cap, classes of employees, and why it counts as an offer of coverage.

An [individual coverage HRA](https://lopifi.com/md/glossary/individual-coverage-hra) reimburses premiums and medical costs for employees who buy individual health insurance. Employers of all sizes may offer one, and contribute as little or as much as they want — but on the same terms to everyone in a class of employees, with amounts allowed to rise with age and family size.

> “You cannot offer an Individual Coverage HRA to any employee to whom you offer a traditional group health plan.”

— [DOL, HHS & Treasury — FAQs on New Health Coverage Options for Employers and Employees, Q5, Q6, Q10](https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/employee-health-coverage-options.pdf) (PDF), Individual coverage HRAs

Classes are the design tool: full-time and part-time, salaried and hourly, employees in the same rating area or state, seasonal and temporary staff, and others the rule lists. Where the group plan and the ICHRA are split by some of those classes, a minimum class size applies. An employer can offer an ICHRA to one class and the group plan to another, but never both to the same class. Employees must generally have notice 90 days before the plan year.

> **Inside the employer mandate.** An individual coverage HRA is a self-insured group health plan, and so an eligible employer-sponsored plan. An employee covered by one, or offered one that is affordable, cannot get a premium tax credit — which is how an ALE can use an ICHRA to make its offer.

> “Employers no longer have to automatically send Form 1095-C to individuals.”

— [Instructions for Forms 1094-C and 1095-C (2025)](https://www.irs.gov/pub/irs-pdf/i109495c.pdf) (PDF), Who files 1094-C and 1095-C, when, and the alternative manner of furnishing

## Where this page's rules come from

- [DOL, HHS & Treasury — FAQs on New Health Coverage Options for Employers and Employees, Q5, Q6, Q10](https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/employee-health-coverage-options.pdf) (PDF) — Individual coverage HRAs (agency)
- [Instructions for Forms 1094-C and 1095-C (2025)](https://www.irs.gov/pub/irs-pdf/i109495c.pdf) (PDF) — Who files 1094-C and 1095-C, when, and the alternative manner of furnishing (irs)
- [Wikipedia, “Health reimbursement account”](https://en.wikipedia.org/wiki/Health_reimbursement_account) — Health reimbursement account (reference)

- **Track:** [Health & benefits](https://lopifi.com/md/learn/benefits)
- **Part of:** [HRAs: QSEHRA and ICHRA](https://lopifi.com/md/learn/qsehra-vs-ichra) — 6 min
- **Terms taught:** [Individual coverage HRA](https://lopifi.com/md/glossary/individual-coverage-hra), [Applicable large employer](https://lopifi.com/md/glossary/applicable-large-employer)
- **Previous:** [QSEHRA](https://lopifi.com/md/learn/qsehra-vs-ichra/qsehra-explained)
- **Next:** [COBRA, and state continuation coverage, Benefits · Lesson 6](https://lopifi.com/md/learn/cobra-for-small-employers)
- **The course:** https://lopifi.com/md/learn