ICHRA Plan Document Requirements: ERISA Elements, SPD, and Notice

An ICHRA plan document is the written legal instrument that creates and governs an individual coverage health reimbursement arrangement, and federal law requires one to exist before any tax-free reimbursements can flow to employees. The ICHRA plan document requirements come from two layers of federal law: ERISA’s general rules for written plan instruments, and the ICHRA-specific regulations at 26 CFR 54.9802-4 and 29 CFR 2590.702-2. Together they dictate what the document must say about eligibility, contributions, substantiation, notice, and amendment. Getting those elements right is what separates a legitimate tax-advantaged benefit from a compliance problem that surfaces during a DOL or IRS audit.

The Four ERISA Elements Every ICHRA Document Must Contain

ERISA requires every employee benefit plan to be established and maintained under a written instrument. Under 29 U.S.C. § 1102, the document must include four specific elements: one or more named fiduciaries who control and manage the plan’s operation, a procedure for establishing a funding policy, a description of how administrative responsibilities are allocated, and a procedure for amending the plan along with identification of who has authority to make amendments.¹ The document must also specify the basis on which payments are made to and from the plan.

Those are the baseline. Everything else that follows layers ICHRA-specific regulations on top of that ERISA foundation.

Defining Employee Classes

One of the most consequential drafting decisions is how the employer divides its workforce into classes. The regulations at 26 CFR 54.9802-4 list eleven permissible classes, and employers can only use these categories or combinations of them.² The permitted classes are:

Full-time employees, defined using either the ACA’s Section 4980H standard or the employer’s own reasonable classification.
Part-time employees, mirrored to whichever full-time definition the employer selects.
Salaried employees.
Non-salaried employees, such as hourly workers.
Employees in the same insurance rating area, grouped by the geographic rating area of their primary work location.
Seasonal employees.
Employees covered by a particular collective bargaining agreement.
Employees in a waiting period who have not yet satisfied the plan’s waiting period for coverage.
Non-resident aliens with no U.S.-source income.
Temporary staffing employees hired for placement at another entity.
Any combination of two or more of the above.

The plan document must clearly state which classes are eligible and which are excluded. Ad hoc groupings outside this list are not permitted. Within a single class, every member must get the same offer, with the one allowed exception that an employer may increase the allowance based on the participant’s age (up to a 3:1 ratio between the oldest and youngest participants) or family size.²

Contribution Amounts, Rollover, and Eligible Expenses

There is no federal minimum or maximum on ICHRA contributions. An employer can offer $200 per month or $2,000, provided the amount is uniform within the class after the permitted age and family-size adjustments. Contribution amounts can differ between classes but not within one.

The document should also state whether unused funds roll over to the following plan year or reset to zero. Rollover is an employer design choice, not a regulatory mandate, and participants need to see which rule applies.

Eligible expenses are governed by Internal Revenue Code Section 213(d), which defines medical care to include amounts paid for diagnosis, treatment, and prevention of disease, as well as insurance premiums covering those services.³ Most ICHRA plan documents limit reimbursement to individual health insurance premiums and out-of-pocket costs such as copays and deductibles, though the document can authorize reimbursement for other qualifying medical expenses. Whatever the employer decides to cover, the plan document is where those boundaries get drawn.

Individual Coverage Requirement and Substantiation

An ICHRA only works if each participant is actually enrolled in individual health insurance coverage or Medicare. The employer cannot reimburse someone who is uninsured.⁴ The plan document must build in a substantiation process to verify enrollment.

Substantiation can take two forms. A participant can provide a third-party document showing active enrollment, such as an insurance card or an explanation of benefits. Alternatively, the participant can submit a written attestation stating that they and any covered dependents are enrolled, along with the coverage start date and the name of the insurer.⁵ Initial substantiation happens when the employee first enrolls in the ICHRA. After that, the employee must confirm continued coverage with each reimbursement request for the month the expense was incurred. Self-attestation is acceptable at both stages.

The document needs to lay out the substantiation procedures in detail: who receives the documentation, what form it takes, and the submission timeline. The employer can rely on the participant’s attestation unless it has actual knowledge that the person is not enrolled in qualifying coverage.⁵

Medicare-Eligible Participants

Employers with Medicare-eligible workers need to address this group specifically. An ICHRA can reimburse Medicare premiums, but the employee must be enrolled in the right combination of Medicare parts. Enrollment in both Part A and Part B together satisfies the requirement, as does enrollment in Part C (Medicare Advantage). Part B alone or Part D alone is not enough.

Once the coverage requirement is met, the ICHRA can reimburse premiums for Part A, Part B, Part C, Part D, and Medigap supplemental insurance. The document should state whether Medicare-eligible employees form a separate class with their own contribution level or are folded into a broader class. Employers cannot design the reimbursement to vary based on what Medicare does or does not cover for a particular individual.

Affordability and Premium Tax Credits

The contribution levels fixed in the document have direct consequences for employees’ access to Marketplace subsidies. An employee offered an ICHRA generally cannot receive premium tax credits unless the offer is “unaffordable.” For 2026, an ICHRA offer is affordable if the employee’s share of the cost for a self-only silver-level Marketplace plan, after applying the ICHRA allowance, does not exceed 9.96% of household income.⁶

If the offer is affordable, the employee loses access to premium tax credits whether or not they accept the ICHRA. If unaffordable, the employee can opt out of the ICHRA and keep the tax credits. Employees must be allowed to make this opt-out decision annually, before the plan year starts, and the document should specify how and when they do so.

For applicable large employers (50 or more full-time equivalent employees), an affordable ICHRA offer satisfies the ACA employer shared responsibility provision. An unaffordable offer does not, and the employer may face penalties under Section 4980H. The affordability math is one of the most consequential design decisions in the entire document.

The Required Annual Notice to Employees

Beyond the plan document itself, the regulations require employers to provide a separate written notice to every eligible employee before the start of each plan year.⁷ This is not the Summary Plan Description. It is a standalone notice that must include:

The maximum dollar amount available to the participant under the ICHRA.
Whether family members are eligible for the ICHRA.
The start and end dates of the plan year.
When new allowance amounts become available.
Whether the ICHRA balance is forfeited upon termination of employment or whether the employee may opt out at that point.
A description of the substantiation procedures and where to find more information about them.
Contact information for someone who can answer questions about the ICHRA.

The Department of Labor publishes a model notice employers can adapt. The plan document should reference the notice obligation and establish how it will be delivered each year.

Adoption, SPD Delivery, and Document Penalties

An authorized company officer must sign and date the plan document to formally adopt it. Until that signature is in place, the ICHRA does not legally exist and no reimbursements can be made on a tax-free basis. The signed original should be kept at the company’s primary place of business and available for government inspection.

After adoption, the employer must produce a Summary Plan Description that communicates the plan’s terms in language the average participant can understand. New participants must receive the SPD within 90 days of becoming covered.⁸ Delivery may be by physical mail or secure electronic means consistent with DOL electronic disclosure rules.

Failing to produce documents when the DOL requests them carries financial consequences. The inflation-adjusted penalty under ERISA Section 502(c)(6) is up to $190 per day, capped at $1,906 per request.⁹ Those numbers compound quickly when an employer cannot locate basic plan documents during an audit.

COBRA Continuation Coverage

ICHRAs are subject to COBRA. When a participant experiences a qualifying event such as termination or a reduction in hours, the employer must offer COBRA continuation. A participant who elects COBRA can continue accessing the ICHRA balance and receives a new annual allowance each year for the duration of the COBRA period, just like an active employee. The employer may charge up to 102% of the estimated cost of providing the benefit.

The document should address COBRA administration: who sends the election notice, how the premium is calculated, and the maximum coverage period, typically 18 months for job loss or reduced hours. Without electing COBRA, an employee’s right to reimbursement generally ends for expenses incurred after their last day of employment.

Amendments and Material Modifications

Changes to the ICHRA, whether adjusting contribution levels, adding or removing classes, or modifying eligibility, require a formal written amendment. The document itself must contain the amendment procedure identifying who has authority to make changes, as required by 29 U.S.C. § 1102.¹ Amendments that bypass the plan’s own procedures risk being unenforceable.

When a significant change is made, the employer must furnish a Summary of Material Modifications to all covered participants. The SMM must be written in language the average participant can understand and delivered no later than 210 days after the end of the plan year in which the change was adopted.¹⁰ An updated SPD incorporating the changes satisfies the obligation as an alternative.

Ongoing Reporting the Document Triggers

The plan creates ongoing obligations that are easy to overlook in the first year.

The PCORI fee applies to ICHRAs as plan sponsors of self-insured health plans. For plan years ending on or after October 1, 2025, and before October 1, 2026, the fee is $3.84 per covered life, reported and paid annually on IRS Form 720.¹¹ Payment is due by July 31 of the year following the plan year end.

Applicable large employers must report ICHRA offers on Form 1095-C using the specific codes 1L through 1U that indicate the type of coverage offered and the affordability safe harbor used.¹² A wrong code can block employees who try to claim premium tax credits on the Marketplace. One quirk worth knowing: ICHRA contributions are not reported on W-2 forms in Box 12, Code DD. The IRS explicitly excludes HRA contributions from that requirement.¹³

The document should also integrate HIPAA privacy provisions to protect health information that surfaces during substantiation and reimbursement. The plan administrator named in the document is responsible for keeping the employer’s access to participant health data within HIPAA’s boundaries. Every one of these obligations flows from what the plan document says, which is why precision in the drafting stage saves significant trouble later.

1
Office of the Law Revision Counsel. 29 U.S. Code 1102 – Establishment of Plan
2
eCFR. 26 CFR 54.9802-4 – Special Rule Allowing Integration of Health Reimbursement Arrangements With Individual Health Insurance Coverage and Medicare
3
Office of the Law Revision Counsel. 26 U.S. Code 213 – Medical, Dental, Etc., Expenses
4
CMS. Individual Coverage Health Reimbursement Arrangements
5
eCFR. 29 CFR 2590.702-2 – Special Rule Allowing Integration of Health Reimbursement Arrangements With Individual Health Insurance Coverage and Medicare
6
Internal Revenue Service. Revenue Procedure 2025-25
7
U.S. Department of Labor. Individual Coverage HRA Model Notice
8
Internal Revenue Service. 401(k) Resource Guide Plan Participants Summary Plan Description
9
U.S. Department of Labor. Adjusting ERISA Civil Monetary Penalties for Inflation
10
eCFR. 29 CFR 2520.104b-3 – Summary of Material Modifications to the Plan
11
Internal Revenue Service. Patient Centered Outcomes Research Trust Fund Fee Questions and Answers
12
Internal Revenue Service. Instructions for Forms 1094-C and 1095-C
13
Internal Revenue Service. Form W-2 Reporting of Employer-Sponsored Health Coverage