One of ICHRA's most consequential design features isn't the reimbursement model — it's the class system.
The IRS allows employers to divide their workforce into up to 11 distinct employee classes and offer different ICHRA allowance amounts (or no benefit at all) to each class. Done right, this lets you target your benefits budget where it matters most, control costs for different workforce segments, and maintain full ACA compliance — all within a single plan design.
Here's a complete breakdown of all 11 classes, the rules that govern them, and how employers are actually using them.
Why Employee Classes Matter
Without classes, an ICHRA must offer the same allowance to every eligible employee (with the only permitted variations being age and family status). That's fine for a homogeneous workforce. It doesn't work well for a company with a mix of full-time salaried staff, part-time hourly workers, remote employees in three states, and a seasonal crew.
Employee classes solve that. They let you structure benefits around how your workforce is actually built — not a one-size compromise.
A few ground rules before diving in:
- Classes must be based on legitimate job-based criteria. You cannot use classes to discriminate based on health status or to cherry-pick who gets benefits in a way that violates nondiscrimination rules.
- Minimum class size rules apply when you're offering ICHRA to some classes but not others (or offering different contribution levels). For employers with 100+ employees, each class must generally have at least 10 members. For employers with fewer than 100, the minimum is a formula-based number (roughly 10% of the workforce), which the IRS recalculates periodically.
- You can combine classes to create more granular segments — more on that below.
The 11 ICHRA Employee Classes
1. Full-Time Employees
Employees who average at least 30 hours per week (or 40 hours, if you don't have ACA employer mandate obligations and prefer that threshold). Full-time is the most common primary class — many employers offer their most generous ICHRA allowance here.
If you're using ICHRA to satisfy the ACA employer mandate (applicable to employers with 50+ FTEs), the 30-hour threshold is required for mandate purposes.
2. Part-Time Employees
Employees averaging fewer than 30 or 40 hours per week, depending on how you've defined full-time. Part-time classes allow a different (typically lower) contribution level or can be excluded entirely from the benefit.
Common use case: a retail or hospitality operator offering a $200/month allowance to part-time staff and $500/month to full-time — giving part-timers a benefit without the same per-head cost.
3. Seasonal Employees
Workers hired on a temporary, short-term basis during predictable high-demand periods (holiday staff, harvest workers, tax season associates). The IRS doesn't require a fixed definition of "seasonal" in this context, but it should be consistent with how the role is actually structured.
Seasonal employees can receive an ICHRA, receive no benefit, or be placed in a waiting period class (see below) if the season is short enough that eligibility is academic.
4. Employees in a Waiting Period
Employees who have been hired but haven't yet become eligible for the ICHRA. Employers can implement waiting periods of up to 90 days. During this period, employees are in their own class and aren't yet receiving the benefit.
This class is largely administrative — it exists so the plan document accurately reflects who is and isn't currently eligible without having to track individual effective dates manually.
5. Salaried Employees
Employees paid a fixed predetermined salary regardless of hours worked. Salaried employees often have different retention dynamics than hourly staff, and some employers choose to structure higher ICHRA allowances for this class to reflect that.
Note: salaried and full-time are not the same class. A salaried employee can be part-time (unusual but legally possible). If your intent is to segment by compensation structure rather than hours, salaried is the right class.
6. Hourly Employees
Workers paid by the hour for actual time worked. Hourly classifications are common in manufacturing, retail, healthcare support, and hospitality. Employers can offer a different allowance structure to hourly workers — including none, if hourly employees are in a class that's excluded.
7. Employees in Different Geographic Locations
One of the most strategically valuable classes. Employers can segment employees by insurance rating area — a geographic region used by ACA insurers to set premiums. These regions are defined by CMS and typically correspond to states, counties, or multi-county groupings.
Why it matters: individual market premiums vary significantly by geography. A $400/month allowance goes a long way in a low-cost market like Tennessee or Georgia. The same allowance may not cover the benchmark silver plan premium in parts of New York or California.
Geographic classes let you calibrate allowances to the actual cost of coverage in each market rather than averaging across your entire workforce.
For fully remote companies with no physical address, the rating area defaults to where the majority of employees live at the start of the coverage period.
8. Employees Covered Under a Collective Bargaining Agreement (CBA)
Employees whose employment terms — including benefits — are governed by a union contract. These employees can be placed in their own class, typically because their health benefits are already defined under the CBA and they shouldn't be mixed into the general ICHRA class.
In most cases, employers aren't offering ICHRA to union employees — they're simply designating them as a separate class to exclude from the ICHRA design while offering the benefit to non-union staff.
9. Employees of Staffing Firms (Temporary Employees)
Workers who provide services to your organization but are formally employed by a staffing agency rather than your company. These employees can be carved into their own class — and in practice, they're usually excluded from the ICHRA, since the staffing firm is their employer of record.
This class is important for compliance clarity. If you use temp workers routinely, explicitly designating them prevents inadvertent inclusion in a class they shouldn't be in.
10. Foreign Employees Working Abroad
Employees who work outside the United States and qualify as nonresident aliens with no U.S.-source income (as defined under 26 CFR 1.105-11). These employees can be separated into their own class, and in most cases, they're excluded from domestic ICHRA benefits since they typically can't access U.S. individual market coverage.
Less common in practice, but important for companies with international operations to address explicitly in their plan documents.
11. Combinations of Two or More Classes
The most flexible option — and often the most useful for complex workforce structures.
You can create combined classes such as:
- Full-time employees in a specific geographic location (e.g., full-time employees in California get $650/month; full-time employees elsewhere get $450/month)
- Salaried full-time employees vs. hourly full-time employees (different allowance levels within the full-time workforce)
- Part-time employees in a waiting period (to cleanly handle newly hired part-timers before they reach eligibility)
Combination classes must still comply with minimum class size requirements. The class can't be so narrow that it effectively isolates one or two individuals.
Practical Guidance on Class Design
Start with your workforce reality. Map your employee population before designing classes. How many full-time vs. part-time? Any remote staff in materially different cost markets? Union employees? The answer to those questions should drive your class structure, not the other way around.
Don't over-engineer it. More classes mean more complexity in plan administration and compliance tracking. Most employers do fine with two to four classes. The option for 11 exists to handle complex scenarios — it's not a target.
Allowance variation within a class is permitted by age and family status. Within a given class, you can vary allowances based on the employee's age (up to a 3:1 ratio, oldest to youngest) and whether they're covering dependents. This gives you additional flexibility to account for cost differences without creating separate classes.
Geographic classes are underutilized. Employers with multi-state workforces consistently leave money on the table by setting a single national allowance. A geographic class analysis — benchmarking LCSP premiums by rating area — often reveals that a differentiated allowance structure delivers the same employee coverage at lower total employer cost.
Work with an administrator who supports your class structure. Some ICHRA administration platforms support all 11 classes. Others are limited to full-time, part-time, and seasonal. Know what you need before selecting a platform.
The Bottom Line
ICHRA's class system is what separates it from a blunt defined-contribution tool. Used thoughtfully, classes let employers match benefit levels to workforce segment, control total benefit spend, and avoid the averaging problem that makes many group plans economically inefficient.
The 11 IRS-approved classes cover virtually every workforce configuration an employer is likely to have. Understanding each one — and the rules that govern how they interact — is the foundation of a well-designed ICHRA.
If you're modeling an ICHRA design for your workforce, use our ICHRA Savings Calculator to estimate allowance levels and total employer cost across your employee mix.