Deciding to offer an ICHRA instead of a traditional group plan is the strategic part. The setup itself is more mechanical — a fixed sequence of decisions and deadlines that, done in order, gets you to a working benefit without surprises. This walkthrough covers the five steps in the order they actually need to happen, plus where businesses most often lose time.
Step 1: Set your allowance amount
Start with the budget, not the plan design. Decide how much you're willing to reimburse each employee per month toward their individual health coverage. There's no federal cap on an ICHRA allowance, so this is entirely your call — many employers anchor it to what they were paying (or planned to pay) under a group plan, then adjust based on what individual-market pricing looks like in the counties where employees live.
If you're an applicable large employer, it's worth checking early whether your allowance is high enough to be considered "affordable" under IRS rules, since that can affect whether the offer satisfies the employer shared-responsibility mandate.
Step 2: Define your employee classes (if you're using more than one)
You can offer the same allowance to everyone, or use IRS-defined employee classes — full-time vs. part-time, salaried vs. hourly, seasonal, or by geographic location, among others — to offer different amounts to different groups. You can even offer an ICHRA to one class while keeping a traditional group plan for another. The classes have to be built to the specific IRS rules to hold up, so this is a good step to have reviewed by an agent or benefits advisor before you finalize it.
Step 3: Give required written notice
Employees generally need advance written notice of the ICHRA offer — typically at least 90 days before the plan year starts — so they have enough time to shop for and enroll in individual coverage. This notice needs to include specific information: the allowance amount, the plan year start date, and a statement about how accepting the offer affects eligibility for ACA premium tax credits. This step is the one most likely to compress your timeline if you start late, so it's worth locking in your go-live date first and working backward.
Step 4: Employees shop and enroll
- Open Enrollment or a Special Enrollment Period. The ICHRA offer itself typically triggers a Special Enrollment Period for employees who receive notice outside the normal Open Enrollment window, so they aren't stuck waiting for the next annual window.
- Real plan comparison, not guesswork. Employees need to weigh individual plans against their own doctors, prescriptions, and household budget — the same comparison shopping any individual insurance buyer would do, ideally with guidance rather than alone.
- Enrollment confirmation. Once enrolled, employees need proof of coverage on file before reimbursements start.
Step 5: Employees submit proof and get reimbursed
Each pay period or month, employees submit proof of their premium payment, and you reimburse them tax-free up to the allowance. This substantiation step is what keeps the reimbursement tax-free to the employee and deductible to the business — skipping it is the most common compliance gap in an otherwise well-run ICHRA. Many employers use a simple recurring process (a form plus a receipt) rather than reinventing this each month.
| Step | Owner | Typical timing |
|---|---|---|
| 1. Set allowance | Employer | Anytime before notice goes out |
| 2. Define classes | Employer (with advisor review) | Same window as Step 1 |
| 3. Written notice | Employer | ≥90 days before plan year start |
| 4. Shop & enroll | Employee | During the notice-triggered enrollment window |
| 5. Substantiate & reimburse | Employee submits, employer pays | Ongoing, monthly |
Want help running this timeline?
We'll help you land on an allowance and class structure, and sit down with each employee to enroll — free, no pressure.
Talk to a licensed agentWhere timelines usually slip
The most common delay isn't the employer-side decisions — it's underestimating the 90-day notice window and starting the process too close to the intended plan year start. The second most common issue is employees delaying their own plan shopping until the last minute, which is where individual guidance (rather than a memo with a dollar amount) makes the biggest difference in a smooth rollout.
How Honorbrook helps
We handle both ends of this checklist. For the business, we help you land on an allowance and class structure and make sure your notice timing works backward from your target plan year. For each employee, we compare ACA Marketplace and off-exchange plans against their doctors and prescriptions and handle the enrollment directly, so nobody on your team is shopping an unfamiliar Marketplace alone. It's free for the business and every employee, and we're licensed across Virginia, Maryland, Georgia, Texas, Michigan, North Carolina, South Carolina, Alabama, Louisiana, Indiana, and West Virginia.
Availability and rules vary by state
Health plans, premiums, enrollment rules and state programs differ by state and sometimes by county, and a given plan may not be available in every state. Honorbrook is licensed in the 11 states below; what we can offer you depends on what carriers sell where you live. Each state’s insurance regulator can verify an agent’s license and answer consumer questions.
- Virginia: Virginia Bureau of Insurance
- Maryland: Maryland Insurance Administration
- North Carolina: North Carolina Department of Insurance
- South Carolina: South Carolina Department of Insurance
- Georgia: Georgia Office of Insurance and Safety Fire Commissioner
- Alabama: Alabama Department of Insurance
- Louisiana: Louisiana Department of Insurance
- Texas: Texas Department of Insurance
- Michigan: Michigan Department of Insurance and Financial Services
- Indiana: Indiana Department of Insurance
- West Virginia: West Virginia Offices of the Insurance Commissioner