Quick Reference

Usage: These addendums are designed as "tear-out" reference guides. Print them, laminate them, or save them to your desktop for quick access during client consultations.

Addendum A: The Affordability Math Cheat Sheet

The Golden Rule: An ICHRA is "Affordable" if the Employee's Contribution for the Lowest Cost Silver Plan (LCSP) does not exceed the IRS threshold of their monthly household income.

The Thresholds

• 2024: 8.39%

• 2025: 9.02%

• 2026 (Current): 9.96%

The Formula

(LCSP Premium − ICHRA Allowance) ÷ Monthly Income ≤ Threshold %

The 3 Safe Harbor Methods (Example Scenarios)

1. The "Federal Poverty Line" (FPL) Method

1. Best For: Simplicity. If you pass this, you pass for everyone.

2. The Math (2025 Mainland FPL approx $15,060):

• Monthly FPL Income: ~$1,255

• Max Employee Cost (9.96%): ~$125/month

3. The Rule: If the employee pays $125 or less for the Silver Plan, the plan is affordable.

4. Example:

• LCSP Premium (Age 40): $500

• Required Employer Allowance: $375 ($500 - $125)

2. The "Rate of Pay" Method

1. Best For: Hourly workforces where hours fluctuate.

2. The Math: (Hourly Rate x 130 Hours) x Threshold %

3. Example:

• Employee makes $15.00/hour

• Deemed Monthly Income: $15 x 130 = $1,950

• Max Employee Cost (9.96%): $194.22

4. The Rule: The employee cannot pay more than $175.89 for the Silver Plan.

3. The "W-2" Method

1. Best For: Salaried/Commissioned employees where you need every inch of room.

2. The Risk: You don't know the exact Box 1 W-2 number until the year ends.

3. The Rule: (Box 1 Wages / 12) x Threshold %.

Addendum B: The Pre-Tax Decision Matrix

Problem: Can we deduct the employee's share of the premium from their paycheck Pre-Tax (Section 125)?

Addendum C: The TPA Audit

Instruction: Do not sign a contract with a TPA until they confirm they can facilitate or Automate the following. If they say "We do this manually," walk away.

• [ ] Generate SEP Notice: Can they click a button to create the legal document that unlocks the Special Enrollment Period?

• [ ] Create ICHRA Plan Design Documents: Generate required documents for the employer to store explaining the group health plan.

• [ ] Accept Binder Payment Receipt: Can their system read a "first month" payment receipt (Binder) as valid proof of coverage?

• [ ] Track Employee Monthly Attestation: Will they gather and track monthly employee statements to validate they are still paying for valid coverage?

• [ ] Track Employee Hiring and Class Changes: To start, stop, or change the employer contribution?

• [ ] Generate Form 1094-C / 1095-C: Do they create the PDF files ready for the IRS?

• [ ] Generate Form 720 (PCORI): Will they calculate the "Average Covered Lives" fee for you?

• [ ] Generate Form 5500: Do they have a partner or system to create this ERISA report for large groups?

• [ ] 90-Day Renewal Notice: Will the system auto-email employees 90 days before the next plan year?

• [ ] Auto-Removal: If an employee is terminated in the payroll system, does the TPA automatically stop reimbursements?

Addendum K: Mini-COBRA States