ICHRA Onboarding Checklist for New Employer Customers 2026

Switching to an Individual Coverage HRA (ICHRA) is a smart move for employers looking for flexible, predictable health benefits. But setting one up involves a few key steps to ensure everything is compliant and runs smoothly. This comprehensive ichra onboarding checklist for new employer customers breaks down the entire process, from initial plan design to ongoing administration. Let’s get started.

Step 1: Design Your ICHRA Plan

The first phase is all about making foundational decisions that define how your ICHRA will work. Getting these details right sets you up for a successful launch.

Decide on an ICHRA Effective Date

Your ICHRA effective date is the first day employees can use their allowance for reimbursements. You can start an ICHRA any day of the year, you don’t have to wait for January 1. Many employers align this date with the termination of an old group plan to prevent coverage gaps. For example, if your group plan ends June 30, you could start your ICHRA on July 1. Remember, launching an ICHRA mid year triggers a 60 day Special Enrollment Period (SEP), giving employees a window to buy individual health insurance.

Set Employee Eligibility Rules

Next, you need to decide who qualifies for the ICHRA. Legally, participants must be W2 employees, not independent contractors. Beyond that, you have the flexibility to define eligibility using employee classes. This is a critical step in any ichra onboarding checklist for new employer customers.

Define Employee Classes

Employee classes are categories you can use to offer different benefits to different groups of workers. The IRS allows for 11 distinct employee classes, including:

• Full time vs. Part time employees
• Salaried vs. Hourly employees
• Employees in different geographic locations
• Seasonal or temporary employees

Using these classes, you could offer a higher allowance to full time staff than you do to part time staff, as long as everyone within the same class is treated equally. If you offer an ICHRA alongside a traditional group plan, minimum class size rules may apply to prevent discrimination.

Establish a New Hire Waiting Period

You can set a waiting period before new hires become eligible for the ICHRA. This period can be up to 90 days, but no longer. For example, you might decide that new employees must wait 30 or 60 days before they can join the plan. Once their waiting period is over, they become eligible and can use their allowance, provided they have enrolled in a health plan.

Choose Which Expenses to Reimburse

An ICHRA can reimburse any medical expense defined under IRS Code §213(d). This includes hundreds of items, from individual health insurance premiums to out of pocket costs like copays, deductibles, prescriptions, and dental care. As the employer, you decide what to cover. You can choose to reimburse:

• Insurance premiums only.
• Premiums plus all eligible out of pocket medical expenses.
• A specific list of expenses (e.g., premiums and prescriptions only).

Whatever you decide, it must be clearly stated in your plan documents.

Set Your Employer Allowance Amounts

The allowance is the monthly amount you give each employee to spend on their healthcare. A key feature of ICHRA is that there are no contribution limits, giving you complete control over your budget. You can vary these allowance amounts by employee class or by family status (e.g., offering more for employees with dependents). An analysis in 2022 found the average ICHRA allowance was about $981 per month, showcasing how generous employers can be. The money is not a vested fund, if an employee doesn’t use their full allowance, the funds remain with the company.

Calculate Your Affordability Safe Harbor

If you are an Applicable Large Employer (ALE) with 50 or more full time equivalent employees, you must ensure your ICHRA offer is considered “affordable” to avoid ACA penalties. An ICHRA is affordable if an employee’s cost for the lowest cost silver plan in their area, after your allowance, is less than a certain percentage of their income (for 2024, this was 8.39%).

Because you don’t know an employee’s household income, the IRS provides safe harbors to simplify this. The most common is the Federal Poverty Line (FPL) safe harbor. Using a platform like SimplyHRA, which has an integrated affordability calculator, makes this step much easier.

Step 2: Prepare Essential Compliance Documents

With your plan design complete, the next phase of this ichra onboarding checklist for new employer customers involves creating the necessary legal and informational documents.

Prepare the Official ICHRA Plan Document

Because an ICHRA is a formal group health plan, it is subject to ERISA. This means you must have a legal plan document that outlines all the terms and conditions. This document includes details on eligibility, allowance amounts, reimbursement rules, claims procedures, and HIPAA privacy policies. Failing to provide this document upon request can lead to significant penalties, sometimes up to $110 per day.

Create the Summary Plan Description (SPD)

The Summary Plan Description (SPD) is a user friendly summary of the formal plan document. It must be written in plain language that employees can easily understand. You are required to give the SPD to every participating employee within 90 days of them joining the plan. This document explains what the plan covers, how to file claims, and their rights under ERISA.

Draft the Summary of Benefits and Coverage (SBC)

The Summary of Benefits and Coverage (SBC) is a standardized four page document that helps employees compare health plans. Even though an ICHRA isn’t traditional insurance, you still need to provide an SBC for the HRA itself. It will describe the allowance amount, what it can be used for, and the coverage period.

Deliver the 90 Day ICHRA Employee Notice

You must provide a written notice to all eligible employees at least 90 days before the start of the ICHRA plan year. This notice is a crucial part of the process, as it gives your team time to shop for an individual health plan. The notice must include the HRA allowance amount, explain how the ICHRA affects their eligibility for premium tax credits, and inform them of their right to opt out.

Step 3: Configure Your System and Onboard Your Team

Now it’s time to set up your administrative systems and get your employees ready. A smooth technical and communication launch is essential.

Collect Company Legal Information and EIN

To set up your ICHRA, you will need your company’s legal name, address, and Employer Identification Number (EIN). This information is used to generate all your legal plan documents and for any required IRS reporting, such as on Form 1095 C for ALEs.

Schedule Your Welcome Call

A welcome call with your ICHRA administrator is a key onboarding step. During this call, you can verify your plan setup, review the employee communication strategy, and get a walkthrough of the administrative portal. At SimplyHRA, our onboarding team makes sure you feel comfortable managing your new benefit from day one. This is a foundational element of our ichra onboarding checklist for new employer customers.

Develop an Employee Communication Plan

Beyond the required 90 day notice, you need a solid communication plan. This isn’t a “one and done” email. Plan to use multiple touchpoints, like an initial announcement, a company wide Q&A session (or webinar), and follow up reminders. Explain why you’re making the change and highlight the benefits of choice and flexibility. Clear, consistent communication is the key to employee adoption and satisfaction.

Plan How to Assist Employees with Coverage Selection

Remember, with an ICHRA, your employees are responsible for choosing their own individual health insurance plan. Many will need help. You can support them by:

• Providing Enrollment Support: Platforms like SimplyHRA have licensed brokers in every state who can provide one on one guidance to your employees.
• Offering Plan Comparison Tools: Some software includes a marketplace where employees can compare ACA plans.
• Sharing Educational Resources: Give your team guides on how to understand health insurance terms like deductibles and metal tiers.

Helping your team navigate this choice is a vital part of a successful ichra onboarding checklist for new employer customers.

Set Up Your Substantiation and Attestation Process

You need a process to verify that employees are using their ICHRA funds correctly (see our overview of employee reimbursement types and tax rules). This means confirming they have qualifying health coverage and are submitting eligible expenses. This is typically done through:

• Attestation: Employees sign a statement confirming they have active health insurance for the month they are seeking reimbursement.
• Substantiation: Employees provide proof, like a receipt or an Explanation of Benefits, for each expense they submit.

Modern HRA software automates this, often by having employees check a box to attest with every claim submission.

Step 4: Manage Ongoing ICHRA Administration

Your ICHRA is live! The final part of the checklist covers the day to day management and ongoing compliance tasks.

Establish a Reimbursement Approval Workflow

You need a clear process for how reimbursement requests are submitted, reviewed, approved, and paid. With a software platform, employees typically upload receipts through a portal or mobile app. The system then flags the claim for your review and approval, ensuring it meets the plan rules and is within the employee’s available allowance.

Define the Declined Claim and Appeal Process

Sometimes a claim must be denied, perhaps because it’s for an ineligible expense or lacks documentation. ERISA requires you to have a formal process for this. The employee must receive a written denial explaining the reason and their right to appeal the decision. Your plan document should detail this appeal procedure.

Configure Reimbursement Payment Methods

Once a claim is approved, you need to pay the employee. Common methods include:

• Payroll Reimbursement: Add the reimbursement amount as a nontaxable line item on the employee’s next paycheck. This is a clean and popular method.
• Direct Deposit: Send an ACH payment directly to the employee’s bank account.
• Benefits Debit Card: Some administrators offer a debit card that employees can use to pay for eligible expenses directly.

Many employers prefer payroll integration, as it leverages existing systems. SimplyHRA, for example, can integrate to payroll to trigger reimbursements automatically, making the process seamless.

Maintain Recordkeeping and Documentation

ERISA requires you to keep detailed records for your ICHRA plan, generally for at least six to seven years. This includes your signed plan documents, SPDs, employee notices, claims records, and any government filings. Using an HRA platform is a huge help here, as it creates an automatic, audit ready digital trail of every transaction.

Protect PHI and Ensure HIPAA Compliance

An ICHRA is a group health plan, which means it is subject to HIPAA. You must protect employees’ Protected Health Information (PHI), which includes any details about their medical claims. This involves limiting who has access to this information, having a designated Privacy Officer, and signing Business Associate Agreements (BAAs) with any third party administrators.

Manage COBRA Continuation

If your company has 20 or more employees, your ICHRA is subject to COBRA. This means you must offer terminated employees the option to continue their HRA coverage at their own expense (plus a 2% administrative fee). While few employees elect to continue an HRA under COBRA, you are still legally required to make the offer.

Verify Premium Payments and Coverage

A core rule of ICHRA is that an employee must have active health insurance for any month they receive a reimbursement. You need a process to verify this. This is often handled through the monthly claims process, where an employee submits proof of their premium payment. Regular attestation also serves as ongoing verification.

Fulfill Tax Reporting Requirements

If you are an ALE, you must report your offer of ICHRA coverage on IRS Forms 1094 C and 1095 C. This reporting shows the IRS that you met your obligations under the ACA employer mandate. Your ICHRA administrator can typically provide the necessary information and codes to complete these forms accurately.

Provide Portal Access and Onboarding Support

Give your employees access to an online portal where they can check their allowance balance, submit claims, and view their reimbursement history. Make sure they know who to contact with questions. A good ichra onboarding checklist for new employer customers always includes robust employee support.

Coordinate Special Enrollment Period Timing

Finally, be mindful of timing. When you first offer an ICHRA or when a new hire becomes eligible, it triggers a 60 day Special Enrollment Period (SEP) for them to buy a plan on the individual market. Communicating this window clearly ensures no one misses their chance to get covered and use their new benefit. Following this ichra onboarding checklist for new employer customers will help you master this timing.

Ready to simplify your health benefits? Schedule a free demo with SimplyHRA to see how our platform automates this entire checklist for you.

Frequently Asked Questions

What’s the most important first step in this ichra onboarding checklist for new employer customers?

The most critical first step is designing your plan, specifically setting your budget by defining employee classes and allowance amounts. This decision drives everything else, from your compliance documents to employee communications.

How long does it take to set up an ICHRA?

With a modern software platform, you can design and set up your ICHRA in under an hour. However, remember the legally required 90 day notice period for existing employees. The full implementation, from decision to live date, will take at least three months.

Can I offer an ICHRA to just some of my employees?

Yes. You can use the 11 federally approved employee classes (like full time, part time, salaried, or hourly) to offer the ICHRA to specific groups while offering another benefit, like a traditional group plan, to others.

What happens if an employee doesn’t buy a health plan?

An employee must be enrolled in a qualifying individual health insurance plan to receive any ICHRA reimbursements. If they fail to secure coverage, they cannot use the funds you’ve allocated to them.

Is this ichra onboarding checklist for new employer customers different for small businesses?

The core steps are the same for businesses of all sizes. However, small businesses (under 50 full time employees) have less compliance complexity, as they are not subject to the ACA’s employer mandate and its affordability rules or penalties. The documentation and communication steps remain essential for everyone.