ICHRA Notice Requirements: Timing, Content, and Penalties

Employers running an Individual Coverage Health Reimbursement Arrangement have to hand every eligible participant a written notice at least 90 days before each plan year begins, and the ICHRA notice requirements are set by joint federal rules from the IRS, Department of Labor, and Department of Health and Human Services. The notice has to cover a specific list of items: the reimbursement amount, the requirement that participants carry individual coverage or Medicare, how the arrangement affects premium tax credit eligibility, opt-out procedures, and more. Missing the deadline or leaving out required content can trigger excise taxes of $100 per day for each affected employee.¹

When the Notice Has To Go Out

For anyone already enrolled in an existing ICHRA, the notice is due at least 90 calendar days before the first day of the upcoming plan year.² For a calendar-year plan that puts the deadline in early October.

For a new hire or an employee who becomes eligible partway through the year, the notice has to arrive no later than the date the ICHRA first takes effect for that person. A narrower rule covers brand-new companies: if the employer was established fewer than 120 days before the start of its first ICHRA plan year, the notice is due no later than the date coverage begins rather than 90 days ahead.²

One category that is easy to miss: the notice goes to every eligible participant, which includes former employees such as retirees who remain eligible for the ICHRA.³ It also matters for timing reasons that receiving an ICHRA offer opens a Special Enrollment Period on the Marketplace: the employee can enroll in individual coverage up to 60 days before or 60 days after the ICHRA’s effective date, and the enrollment has to be completed through the Marketplace Call Center rather than online.⁴ Sending the notice on time is what gives employees room to shop.

What the Notice Must Contain

The three agencies publish a model notice, and employers can use it verbatim or draft their own as long as every required element is present.³ The required elements are:

The maximum reimbursement amount available per participant for the plan year, including the self-only amount if the ICHRA varies by family size or age, plus the proration rules for mid-year entrants.
A clear statement that the employee and any covered dependents must be enrolled in individual health insurance or Medicare (Part A and B, or Part C) for every month they participate in the ICHRA, and that short-term or limited-duration insurance does not count.
A statement clarifying that the arrangement is an individual coverage HRA and not a Qualified Small Employer HRA or another type of HRA.
Instructions on how and when the employee can decline the ICHRA, and what happens to the benefit upon termination of employment.
Statements explaining that the employee cannot claim a premium tax credit for any month covered by the ICHRA, and how opting out may or may not restore that eligibility depending on affordability.
The information the employee needs to give the Marketplace when applying for coverage, including whether they are a current or former employee.
Which dependents, if any, are eligible for the ICHRA.
When ICHRA coverage can first begin for the participant, with the rules for employees who become eligible less than 90 days before the plan year or mid-year.
The start and end dates of the plan year and when new HRA amounts become available.
A description of when and how the employee must prove enrollment in qualifying coverage.
If the plan is subject to ERISA, a note that the individual health insurance the employee buys is not itself an ERISA plan, assuming the employer meets the conditions for that safe harbor.
A phone number and contact details for someone who can answer questions about the arrangement.

Extra information is allowed. Nothing in the notice can contradict the required items.²

The Premium Tax Credit Section

The premium tax credit language is the hardest part of the notice to get right because it directly affects whether employees can receive federal subsidies. An employee offered an affordable ICHRA cannot claim a premium tax credit, even if they opt out of the ICHRA entirely, and the same restriction reaches family members who are eligible for the arrangement.⁵

An ICHRA counts as affordable when the cost of the lowest-cost silver plan available in the employee’s rating area, minus the ICHRA contribution, does not exceed 9.96% of household income for 2026 plan years.⁶ So the notice has to give employees the ICHRA allowance amount and the zip code the employer used to look up the lowest-cost silver plan, which is what an employee needs to run the math.

Because employers rarely know actual household income, the regulations offer three affordability safe harbors that use a proxy figure:

The Federal Poverty Line safe harbor uses the federal poverty level for a single individual ($15,960 in the continental U.S. for 2026) as a stand-in for household income. It is the simplest to administer and the most conservative, typically requiring higher employer contributions.⁷
The rate of pay safe harbor uses the employee’s hourly rate (assuming 130 hours per month for hourly workers) or monthly salary, multiplied by the affordability threshold.
The W-2 wages safe harbor uses the employee’s Box 1 W-2 income. This can allow higher employee cost shares but is harder to predict in advance since W-2 amounts are not finalized until year-end.

Different safe harbors can apply to different categories of employees, but each chosen method has to be applied uniformly within its category. The notice has to include the safe harbor language and point employees to the Marketplace for a personalized affordability determination based on actual household income.

One point that trips employees up: opting out of an unaffordable ICHRA restores premium tax credit eligibility, but opting out of an affordable one does not.⁵ Employees who assume they can decline the ICHRA and still get subsidized Marketplace coverage may end up paying full price with no recourse until the next plan year, so the notice needs to spell this out.

Reflecting Employee Classes in the Notice

Employers can set different ICHRA amounts for different classes of employees. Permitted classes include full-time, part-time, salaried, hourly, seasonal, collectively bargained, employees in a waiting period, employees working abroad, and employees grouped by geographic rating area. Classes can also be combined, such as part-time employees in a specific metro area.

Within any given class, the offer has to be on the same terms for everyone. Individual employees cannot be singled out for different amounts. The written notice has to show the correct maximum dollar amount for that employee’s specific class, including the self-only amount when the plan varies contributions by family size or age.²

Substantiation Runs Alongside the Notice

The notice describes substantiation, but the actual verification is a separate ongoing obligation. No reimbursement can go out until it is in place, and there are two layers.⁸

Before each plan year begins, or before an employee first becomes eligible, the employer has to confirm that the participant and any covered dependents are enrolled in individual health insurance or Medicare for the upcoming year. This is usually handled once at enrollment.

Then, for each reimbursement, the plan has to verify that the employee was enrolled in qualifying coverage during the month the expense was incurred. A brief attestation covering the relevant month is enough for this second layer.⁸

Acceptable documentation includes a written employee attestation, a copy of the insurance card, an explanation of benefits from the insurer, or another third-party document showing enrollment. For the per-expense layer, direct premium payment by the ICHRA platform also satisfies the rule. The federal agencies publish model attestation forms, and custom forms work as long as they capture the necessary information.

How Long To Keep the Notice and Related Records

ERISA Section 107 requires plan sponsors to keep records supporting required filings for at least six years from the filing date.⁹ That is the operative window for ICHRA compliance materials.

Retain copies of every written notice delivered, proof-of-coverage attestations, reimbursement requests and approvals, and correspondence about opt-outs or eligibility changes. If an audit or dispute comes up, the employer has to prove that notices were timely delivered and coverage was substantiated before each reimbursement. Early destruction of these records is a common and avoidable compliance failure.

Penalties for Missing or Botching the Notice

A failure to meet ICHRA notice or substantiation requirements is treated as a group health plan violation under Internal Revenue Code Section 4980D. The excise tax is $100 per day for each affected individual, running from the date the violation begins until it is corrected.¹⁰ An employer with 50 affected employees who misses the notice deadline by 30 days is looking at $150,000 in exposure before anything else.

Relief is available. If the failure was due to reasonable cause and not willful neglect, and the employer corrects it within 30 days of discovering the problem, no tax is imposed.¹⁰ Unintentional failures without that safe harbor are capped at the lesser of 10% of the prior year’s group health plan spending or $500,000. When the IRS finds a violation during an examination that has not already been corrected, minimum penalties of $2,500 apply regardless of intent, rising to $15,000 for more-than-minor violations.

The Department of Labor can impose separate civil penalties tied to ERISA notice failures, and for applicable large employers a botched or missing ICHRA offer can create additional Section 4980H shared responsibility exposure if the arrangement is not treated as affordable minimum-value coverage.

1
Federal Register. Health Reimbursement Arrangements and Other Account-Based Group Health Plans
2
eCFR. 26 CFR 54.9802-4 – Special Rule Allowing Integration of Health Reimbursement Arrangements With Individual Health Insurance Coverage
3
U.S. Department of Labor. Individual Coverage HRA Model Notice
4
HealthCare.gov. Getting Health Coverage Outside Open Enrollment
5
Internal Revenue Service. Questions and Answers on the Premium Tax Credit
6
Internal Revenue Service. Rev. Proc. 2025-25
7
HHS ASPE. 2026 Poverty Guidelines
8
U.S. Department of Labor. Individual Coverage HRA Model Attestations
9
U.S. Department of Labor. Recordkeeping in the Electronic Age
10
Office of the Law Revision Counsel. 26 USC 4980D – Failure to Meet Certain Group Health Plan Requirements