ICHRA Onboarding Checklist for New Employer Customers (2026)

Switching to an Individual Coverage Health Reimbursement Arrangement (ICHRA) is a fantastic way to offer flexible, budget friendly health benefits. Instead of a one size fits all group plan, you give employees a tax free allowance to buy their own insurance. This gives them choice and gives you predictable costs. But where do you start?

Getting it right involves a few key steps. This complete ichra onboarding checklist for new employer customers walks you through the entire process, from initial strategy to ongoing administration, ensuring your rollout is smooth, compliant, and successful.

Phase 1: Strategy and Plan Design

Before you get into the details, you need a solid strategy. These first steps are the foundation of your entire ICHRA program.

1. Evaluate if an ICHRA is a Good Fit

First, decide if an ICHRA is the right move for your company. Any business with at least one W-2 employee can offer one, but it’s best to review the ICHRA pros and cons. Consider your current headaches with health benefits. Are you struggling with high premiums or low participation in a group plan? Small business health premiums have been rising around 23% since 2022, making cost control a major issue for many.

ICHRAs are especially popular with smaller companies; nearly 64% of organizations offering ICHRAs or similar plans have five or fewer employees. If your team is spread across different states or has diverse needs, an ICHRA can be a perfect solution.

2. Define Your Employee Classes

An employee class is simply a way to group employees using legitimate job based criteria. This is how you can offer different allowance amounts or eligibility rules to different groups without discriminating. The regulations allow for 11 distinct classes, including:

• Full time employees
• Part time employees
• Salaried employees
• Hourly employees
• Employees in different geographic locations
• Seasonal employees

You can even combine categories (for example, “full time employees in California”). Just remember, everyone within the same class must be treated equally.

3. Set Your Allowance Amounts

The allowance is the fixed amount of money you provide each employee to reimburse their health costs. A key feature of an ICHRA is that there are no federal caps on how much you can contribute. You can offer a few hundred dollars or enough to cover an entire premium, it’s all up to your budget.

Within a class, the allowance must be the same for everyone, with two exceptions: you can vary it based on an employee’s age and their family size (for example, offering more to an employee covering a spouse and children). Many employers choose to only reimburse insurance premiums, which makes monthly costs highly predictable.

4. Understand the Impact on Affordability and Tax Credits

This is a big one, especially if you’re an Applicable Large Employer (ALE) with 50 or more full time employees. If you offer an ICHRA that is considered “affordable” under ACA rules, your employees are not eligible for premium tax credits (PTCs) on the Marketplace.

For 2026, an ICHRA is affordable if the employee’s share of the premium for the lowest cost Silver plan in their area is 9.96% or less of their household income. ALEs must offer affordable coverage to avoid potential IRS penalties. If your offer is unaffordable, an employee can choose to opt out of the ICHRA and claim tax credits on the exchange.

Phase 2: Legal and Documentation

With your strategy set, it’s time to handle the essential paperwork. Proper documentation is non negotiable for compliance. Completing this part of the ichra onboarding checklist for new employer customers is crucial for avoiding legal issues down the road.

1. Coordinate Your Group Plan Cancellation

If you are moving from a traditional group plan, timing is everything. You need to end your old plan without creating a coverage gap for your team. A common strategy is to terminate the group plan on December 31 and launch the ICHRA on January 1. Work with your current insurance carrier to confirm the cancellation date and notify your employees well in advance so they have time to shop for a new individual plan.

2. Prepare Your Plan Document and SPD

Every ICHRA must be governed by two key legal documents.

• The Plan Document: This is the formal, technical document that outlines all the terms and conditions of your HRA. It’s the official blueprint required by ERISA.
• The Summary Plan Description (SPD): This is a simplified, easy to read summary of the plan for your employees. Think of it as the user guide to their new benefit.

You must have these documents in place before your ICHRA starts. A good administrator can provide compliant templates. Remember to keep these records for at least six years.

3. Draft and Time the ICHRA Employee Notice

You are legally required to provide a written notice to every eligible employee about the ICHRA. This notice explains the benefit, the allowance amount, how it affects tax credits, and their right to opt out.

For an existing plan, this notice must be provided at least 90 days before the start of the new plan year. For example, for a January 1 start date, you’d need to send the notice by October 3 of the prior year. For new hires, you must provide it no later than their coverage effective date.

4. Include an Opt Out Statement and Medicare Notice

The employee notice must clearly state that employees have the right to opt out of the ICHRA. This is important for those who might be eligible for larger subsidies on the exchange if your HRA is unaffordable. The notice should also explain how the ICHRA integrates with Medicare. An employee on Medicare Parts A and B or Part C can use the HRA to reimburse their premiums.

Phase 3: Communication and Rollout

Now it’s time to introduce the new benefit to your team. Clear communication is the key to a successful launch and high participation.

1. Create a Communication Plan and Kickoff Meeting

Don’t just send the legal notice and call it a day. Develop a strategy to educate your employees. Start early with emails and an FAQ document. Host a kickoff meeting or webinar to explain what an ICHRA is, why you’re offering it, and what steps they need to take. Frame it as a positive change that gives them more control and flexibility over their healthcare.

2. Help Employees Select a Plan and Use Their SEP

For many employees, this will be their first time shopping for individual health insurance. The good news is that receiving an ICHRA offer triggers a Special Enrollment Period (SEP), allowing them to enroll in a plan outside the standard open enrollment window. This SEP generally opens 60 days before the ICHRA starts and can last up to 60 days after.

Provide resources to help them navigate this process:

• Share links to Healthcare.gov or your state’s marketplace.
• Explain basic insurance terms like “deductible” and “network.”
• Connect them with licensed brokers who can provide one on one support. Some administrators, like SimplyHRA, include access to licensed benefits advisors to help employees find the right plan.
• Share a quick guide on how to use AI to pick your health plan.

3. Designate a Contact for Questions

Your employee notice must include contact information for someone who can answer questions about the ICHRA. This could be an HR manager or the support line for your third party administrator. Make sure whoever you designate is prepared to help your team navigate their new benefit.

Phase 4: Administration and Ongoing Management

Your ICHRA is live. The final section of our ichra onboarding checklist for new employer customers covers the day to day tasks that keep your plan running smoothly.

1. Choose an ICHRA Administrator

While you can self administer, most employers partner with a technology platform to handle the complexities. A great administrator provides compliance support, generates documents, and manages the reimbursement process. When choosing one, look for seamless payroll integration. For instance, SimplyHRA integrates directly with systems like Gusto and Rippling to trigger reimbursements automatically through your payroll, saving you countless hours of manual work.

2. Manage Verification and Reimbursements

To stay compliant, you must verify two things: that an employee belongs to an eligible class and that they have qualifying health insurance for every month they receive a reimbursement. This is typically done through a signed attestation and proof of coverage. Your administrator should also have a system to ensure reimbursement accuracy, preventing overpayments or reimbursement for ineligible expenses. Technology can help here; some platforms use AI to automate expense classification and verification.

3. Handle Life Changes and Renewals

Life events like marriage or having a child can change an employee’s insurance needs. Your plan should have a process for managing these qualifying life events (QLEs), such as adjusting allowances if you offer different amounts based on family status.

You should also monitor participation and review your plan annually. Use utilization data to decide if you need to adjust allowances for the next plan year. This review is a key part of any good ichra onboarding checklist for new employer customers, as it ensures the benefit remains valuable over time.

4. Onboard New Hires and Manage Offboarding

Develop a standard process for new hires. This includes providing the employee notice by their coverage start date, explaining their Special Enrollment Period, and getting them set up in your system. Likewise, have a clear offboarding process that explains COBRA rights and terminates reimbursements for departing employees.

5. Maintain Records and Ongoing Support

Finally, remember that compliance is ongoing. Keep all plan documents, notices, and reimbursement records for at least six years as required by ERISA. Continue to provide support and training for your team, especially for new hires or during annual renewals. A well supported team is a happy and productive one. Following this ichra onboarding checklist for new employer customers will set you up for success.

A well implemented ICHRA is a powerful tool for attracting and retaining top talent. By following this checklist, you can confidently navigate the setup process and provide a health benefit that truly works for your team. Schedule a free demo with SimplyHRA to see how our platform can automate these steps for you.

Frequently Asked Questions (FAQ)

1. What is the most critical step in an ichra onboarding checklist for new employer customers?
While every step is important, accurately calculating affordability and clearly communicating it to employees is critical. This ensures employees can make informed decisions about premium tax credits and helps Applicable Large Employers (ALEs) avoid significant IRS penalties.

2. How long does the ICHRA setup process take?
With a modern administration platform, the initial plan design can be done in minutes. However, the full onboarding timeline is often dictated by the 90 day employee notice requirement. You should plan to start the process at least three to four months before your desired launch date.

3. Can I offer different ICHRA allowance amounts to different employees?
Yes, but only based on legitimate, job based employee classes. For example, you can offer one amount to full time employees and another to part time employees. Within a class, you can only vary the amount based on age or family size.

4. What happens if an employee doesn’t use their full ICHRA allowance?
It depends on your plan design. Most ICHRA plans are set up so that unused funds do not roll over to the next year; the employee simply forfeits the remaining balance. This helps keep employer costs predictable.

5. How do employees prove they have health insurance?
Employees must attest that they have qualifying health coverage. This is typically done by signing a form during enrollment and confirming it with each reimbursement request. Employers may also ask for a copy of an insurance card or policy document as initial proof. A good administrator automates this substantiation process.

6. Is following an ichra onboarding checklist for new employer customers enough to stay compliant?
This checklist covers the major requirements under ERISA, the IRS, and the ACA. However, regulations can change. Partnering with a dedicated ICHRA administrator like SimplyHRA provides ongoing compliance support, helping you stay up to date with legal documents, reporting, and notices.