ICHRA:
defined contribution beats defined benefit — for the right employer.

Yes, and it is one of the reasons employers pick ICHRA. The IRS recognizes 11 employee classes: full-time, part-time, seasonal, salaried, hourly, geographic rating area, collective-bargaining, non-resident aliens, waiting-period staff, and combinations of those. You can put one class on ICHRA and keep another on a traditional group plan, say ICHRA for remote staff and a group plan for the home office. What you cannot do is treat people inside the same class differently. Every full-time employee in a given rating area gets the same offer. Set the classes before the plan year and write them into your plan document.

For 2026, an offer counts as affordable when the employee's share of the lowest-cost silver plan in their area stays under 9.96 percent of household income. With ICHRA, that share is the local silver premium minus your monthly allowance. If the leftover cost runs above 9.96 percent of their monthly household income, the offer fails, the employee can turn ICHRA down with no penalty, and your employer-mandate exposure kicks in once you pass 50 full-time employees. The trap is geography. An allowance that sails through in Phoenix can fail affordability in a high-premium county, so run the number market by market.

It cuts one way and adds another. Easier: you stop reporting carrier and plan-level detail, because each worker holds an individual policy. Harder: on Form 1095-C you now report the allowance you offered, the class each person sits in, their age and ZIP (those set the benchmark silver plan), and whether the offer cleared affordability. The IRS added a set of ICHRA codes, 1L through 1T, for the different allowance-and-class combinations. Year-one filers routinely underestimate this and trip a Letter 226-J two years later. Hand the ICHRA reporting to a specialist admin like Take Command, Gravie, or PeopleKeep instead of doing it in-house.

Often, but it turns on three things: where your people live, how your current group plan is running, and how much benefit variation you can stomach. In states with deep individual markets like Florida, Arizona, North Carolina, and Texas, ICHRA tends to undercut a group plan by 10 to 25 percent. In thin markets like New York, California, and Massachusetts, that edge shrinks or flips. If your group plan has been claims-heavy, ICHRA's fixed allowance caps what you spend. The catch is that employees now pick their own plans, so satisfaction varies. At 75 employees, model county-level allowances against your current all-in cost. Land within 5 percent and the flexibility usually earns the switch.

This is the failure mode to check before you commit. In most counties, workers see 3 to 8 marketplace plans from 2 to 4 carriers, which is plenty. In rural pockets of West Virginia, Oklahoma, or Arizona, the choice can drop to one carrier and a plan or two. Before you offer ICHRA, run a county-level adequacy check: pull the actual plans in each employee's ZIP on Healthcare.gov, confirm the big hospital systems are in network, and confirm each person's doctor shows up in at least one option. If more than 5 percent of your staff sit in thin counties, keep them on a group plan as their own class and run ICHRA for everyone else.

Yes, though it comes down to how you build the plan. A premium-only ICHRA covers just the monthly insurance premium, and the worker pays deductibles, copays, and prescriptions out of pocket. A premium-plus ICHRA reimburses the premium and qualified out-of-pocket costs up to the allowance. Premium-plus gives employees more room but adds work on your end, since someone has to process receipts and verify expenses. Most ICHRA administrators handle either version, and you lock the choice into the plan document up front. Employers with richer budgets over 1,000 dollars a month tend to pick premium-plus; premium-only is the norm around 400 to 700 dollars a month.

ICHRA is a W-2 tool. Under the IRS rules, a 1099 contractor is not an employee, so they cannot be on it. If your crew is mixed, you have a few moves. Offer ICHRA to your W-2 staff only, which the class rules handle cleanly. Give contractors a plain cash stipend for coverage instead, knowing it counts as taxable income to them. And take a hard look at how those contractors actually work: set hours, supervised tasks, and no outside business often mean they are misclassified, which is its own problem. ICHRA shines with an all-W-2 workforce; blended shops usually run it for one group and a stipend or nothing for the rest.