Establishing the Plan Year
While an ICHRA can technically begin on the first of any month, the vast majority of employers choose to align their "Plan Year" with the calendar year (January 1st). This optimally coincides with the ACA Individual Market Open Enrollment period, generally giving employees the broadest selection of carrier plans without needing to rely strictly on a Special Enrollment Period (SEP).
Drafting Legal Documents
An ICHRA is a formal, ERISA-governed benefit plan, requiring legally binding documentation before going live:
📄 Adoption Agreement
Formally dictates the employer's customized rules, defining the specific classes, allowance amounts, and eligibility requirements.
📋 Wrap Document / SPD
Must be distributed to participating employees to explain their rights, appeals processes, and the plan's mechanics in plain language.
Selecting a Reimbursement Method & Money Flow
Employers must establish how the tax-free funds will flow to the carriers:
🔄 Manual Reimbursement
Employees pay premiums out-of-pocket, submit proof to the TPA, and receive tax-free reimbursement on their paycheck.
⚡ Integrated Auto-Pay
A frictionless, "payroll-deducted" experience. The employer deposits the total monthly ICHRA budget into a consolidated holding account managed by the Payment Solution. The Payment Solution then automatically wires the full premium payments to each individual carrier on behalf of the employees.
ACA Employer Reporting
Applicable Large Employers (ALEs with 50+ FTEs) must still comply with the ACA Employer Mandate. Offering an ICHRA satisfies this requirement, but the offer must be properly reported to the IRS at the end of the year using Form 1095-C. This filing proves to the IRS that an "affordable" offer of Minimum Essential Coverage (MEC) was made, actively shielding the employer from massive Penalty A and Penalty B fines.
PCORI Fee
Because an ICHRA is technically classified by the IRS as a self-insured health plan, the employer is responsible for paying the annual Patient-Centered Outcomes Research Institute (PCORI) fee. This is filed using IRS Form 720, typically due by July 31st of the year following the end of the plan year. The fee is minor (usually a few dollars per covered life), but missing it is one of the most common compliance oversights.
Notice Timing Exceptions
For employees who become eligible during the plan year, or for a newly established ICHRA where notice cannot physically be given 90 days before the start of the plan year, the required notice must be provided no later than the date coverage under the ICHRA can begin. This operational flexibility allows employers to abandon a terrible mid-year group health renewal and pivot to an ICHRA without being forced to wait three months to launch.
The Ongoing 90-Day Rule
After the initial launch year, employers must follow the standard timeline. By law, they must provide eligible employees with a formal, written notice at least 90 days before the start of each subsequent ICHRA plan year (typically right before the Open Enrollment Period).