ICHRA affordability and Marketplace subsidies

Start with the right premium benchmark

For the employee’s ICHRA affordability analysis, the benchmark is the self-only lowest-cost silver plan available to the employee through the relevant Marketplace, reduced by the applicable self-only HRA amount. Compare the remaining monthly amount with the applicable percentage of monthly household income. The second-lowest-cost silver plan used in other subsidy calculations is not the ICHRA affordability benchmark.

Use the correct plan year

Illustration: employee household-income comparison

For a 2027 plan-year illustration, assume a $600 monthly lowest-cost silver premium, a $350 monthly self-only ICHRA amount, and $48,000 annual household income. The remaining premium is $250. The monthly income threshold is $48,000 ÷ 12 × 10.22% = $408.80. Under these simplified assumptions, $250 is below the threshold.

This example is not an employer safe-harbor test, an insurance quote, or a personal subsidy determination. Actual coverage availability, HRA terms, household facts, and Marketplace determinations must be evaluated.

Acceptance and tax credits

An affordable ICHRA offer generally prevents the affected individual from receiving a Marketplace premium tax credit even if the offer is declined. Accepting ICHRA coverage also prevents a credit for the same months. If the offer is unaffordable, an employee must opt out to potentially qualify for a credit, and must still meet the other eligibility rules. Family-member eligibility deserves its own review.

Employer safe harbors are a different analysis

ALEs may use applicable W-2, rate-of-pay, or federal-poverty-line affordability safe harbors under the employer shared-responsibility rules. ICHRA-specific location and lookback approaches appear in proposed regulations with a reliance provision and are referenced in IRS reporting guidance; they should not be described as final merely because they are used in practice.

The appropriate methodology, consistency rules, employee data, and available reliance must be documented with the employer’s benefits and tax advisors. This site does not make automated compliance determinations.

What to bring to a review

• Intended HRA plan year and effective date.
• Employee residence and work-location data through an approved secure process.
• Proposed self-only contribution schedule.
• Relevant premium data and coverage year.
• ALE assessment and selected employer methodology.