Lock the plan year
Record the CHOICE plan-year start date and use the percentage and premium data applicable to that year.
CHOICE DESIGN CHECKLIST · NAMING UPDATED SEPTEMBER 9, 2026
CHOICE Arrangement employee classes, affordability, and notices
Short answer: A CHOICE Arrangement can use permitted, employment-based classes, but employees within a class generally must receive the arrangement on the same terms, subject to allowed variations. For 2027 plan years, the Section 36B required contribution percentage is 10.22%, but affordability still requires current employee and lowest-cost-silver-plan inputs. Eligible employees generally must receive a CHOICE notice at least 90 days before the plan year, with different timing for people who become eligible later. These rules are connected, so class design, affordability, tax-credit communication, notices, and substantiation should be reviewed together.
Official sources: CMS: Employer Initiatives — CHOICE Arrangements · U.S. Department of Labor: FAQs on New Health Coverage Options · IRS: Health Reimbursement Arrangements and affordability safe harbors · IRS Revenue Procedure 2026-26: 2027 required contribution percentage · U.S. Department of Labor: Individual Coverage HRA Model Notice
Review four connected tasks for CHOICE Arrangements (formerly ICHRAs): permitted employee classes, affordability, premium-tax-credit consequences, and notice and coverage-verification workflows.
By NHP University Editorial Team · Review method · CMS naming reviewed September 9, 2026; technical sources reviewed August 14, 2026
CURRENT CMS TERMINOLOGY
CHOICE Arrangements: the current name
CMS now uses CHOICE Arrangements for the arrangements formerly called ICHRAs. This naming update does not itself change the requirements discussed in this guide.
Sources for this section: CMS: Employer Initiatives — CHOICE Arrangements
CLASS DESIGN STARTS WITH THE FEDERAL CATEGORIES
Map employees only into permitted CHOICE classes
Employers can use CHOICE for all eligible employees or distinguish among permitted employment-based classes. A familiar internal label is not automatically a permitted CHOICE class.
| Class-design question | What to document | Reason to pause |
|---|---|---|
| Which permitted class applies? | Full-time, part-time, salaried, non-salaried, seasonal, collective-bargaining, waiting-period, staffing-firm temporary, nonresident aliens with no U.S.-based income, geographic, or a permitted combination | The proposed group is based on health, claims, expected cost, job performance, or another unsupported label |
| Are terms consistent within the class? | Eligibility, available amount, effective dates, covered family members, and reimbursable-expense rules | Two employees in the same class receive materially different terms without a rule-permitted reason |
| Is group coverage offered to another class? | The exact group-plan and CHOICE classes, employee counts, and the rule used to test any minimum class size | Employees in the same class are offered a choice between the employer's traditional group plan and CHOICE |
| Does contribution vary by age or family size? | The written method and the limits that apply to any permitted variation | The amount is being customized employee by employee without a documented rule |
Sources for this section: U.S. Department of Labor: FAQs on New Health Coverage Options · CMS: Health Reimbursement Arrangements
THE ANNUAL PERCENTAGE IS ONLY ONE INPUT
Test CHOICE affordability with the current plan-year method
For plan years beginning in 2027, IRS Revenue Procedure 2026-26 sets the Section 36B required contribution percentage at 10.22%. That annual number should not be copied into a prior-year calculator or treated as a complete affordability answer.
CHOICE affordability generally depends on the employee's required contribution after the employer's monthly CHOICE amount is applied to the applicable lowest-cost silver plan for self-only coverage. Location, age, plan year, timing, and the distinction between employee premium-tax-credit eligibility and an employer's Section 4980H analysis can change which inputs and safe harbors apply.
Use the correct location and premium
Identify the applicable self-only lowest-cost silver plan and document whether residence or an available employer safe harbor controls the location input.
Separate the two questions
Do not assume that an employer safe-harbor result automatically decides an employee's premium-tax-credit eligibility; document which test is being performed.
Retain the inputs
Keep the employee class, location, age or age input, CHOICE amount, premium source, plan year, method, and review date with the result.
Sources for this section: IRS Revenue Procedure 2026-26: 2027 required contribution percentage · IRS: Health Reimbursement Arrangements and affordability safe harbors · CMS: Health Reimbursement Arrangements · IRS: Questions and Answers on the Premium Tax Credit
THE NOTICE AND COVERAGE RECORD ARE OPERATING CONTROLS
Build notice, opt-out, and substantiation steps into the launch calendar
The CHOICE notice generally must reach eligible participants at least 90 calendar days before the beginning of each plan year. For a participant who becomes eligible later, the timing follows the later-eligibility rule rather than an impossible retroactive 90-day deadline. Use the current model and regulations to confirm timing and required content for the employer's facts.
Employees and covered family members generally must have qualifying individual health coverage or Medicare for each month covered by CHOICE. The arrangement needs an annual coverage-substantiation process and an ongoing process tied to reimbursement requests. The Department of Labor publishes model attestations, but the employer or administrator must confirm the actual process and records it will use.
Customize the notice
Insert the arrangement's terms, available amount, effective date, eligible household members, contact information, opt-out process, and other required plan-specific facts.
Track delivery
Record which eligible participants received the notice, the version sent, delivery method, and date.
Own opt-out handling
Document how and when participants can opt out and waive future reimbursements, including before each plan year.
Verify coverage
Define annual and reimbursement-time substantiation, exception handling, record retention, privacy controls, and administrator responsibility.
Sources for this section: U.S. Department of Labor: Individual Coverage HRA Model Notice · U.S. Department of Labor: Reporting and Disclosure Guide for Employee Benefit Plans · U.S. Department of Labor: Individual Coverage HRA Model Attestations · CMS: Health Reimbursement Arrangements
TURN THE RULES INTO A REVIEWABLE HANDOFF
Use one implementation file to keep assumptions visible
| File section | Minimum contents | Accountable review |
|---|---|---|
| Workforce and classes | Census date, permitted classes, employee counts, group-plan offers, same-class terms, and unresolved classifications | Employer, benefits adviser, administrator, and legal or ERISA support as needed |
| Affordability | Plan year, percentage, premium source, location method, CHOICE amounts, employee inputs, safe-harbor choices, and calculation date | Employer and the qualified tax, benefits, or compliance professionals responsible for the analysis |
| Employee communication | Notice version, delivery dates, employee support path, Marketplace and tax-credit explanation, language access, and escalation process | Employer, administrator, communications owner, and qualified reviewers |
| Administration | Opt-out, annual substantiation, reimbursement substantiation, privacy, payroll, reimbursements, records, and renewal calendar | Plan administrator, payroll, privacy, tax, legal, and service owners as applicable |
Sources for this section: CMS: Health Reimbursement Arrangements · IRS: Health Reimbursement Arrangements and affordability safe harbors · U.S. Department of Labor: Individual Coverage HRA Model Notice · U.S. Department of Labor: Individual Coverage HRA Model Attestations
TRAINING SUPPORTS THE WORK; IT DOES NOT APPROVE IT
Keep a CHOICE course in the education lane
A private CHOICE course can help a broker recognize class, affordability, notice, tax-credit, and administration questions. It does not calculate or approve an employer's arrangement, create plan documents, satisfy a notice deadline, establish tax-credit eligibility, or replace qualified legal, tax, ERISA, payroll, actuarial, or administrative support.
uPPo is a private NHP University education program. It is not a CMS, IRS, Department of Labor, state, carrier, or exchange credential; it does not grant an insurance license or guarantee employment, clients, sales, commissions, income, or a compliant plan result.
Sources for this section: CMS: Health Reimbursement Arrangements · IRS: Health Reimbursement Arrangements and affordability safe harbors · U.S. Department of Labor: Individual Coverage HRA Model Notice
COMMON QUESTIONS
CHOICE Classes, Affordability & Notices FAQ
What are the permitted CHOICE employee classes?
The federal rules recognize employment-based categories including full-time, part-time, salaried, non-salaried, seasonal, collective-bargaining, waiting-period, staffing-firm temporary, nonresident aliens with no U.S.-based income, geographic, and permitted combined classes. The exact design, same-class terms, and any minimum-class-size rule should be reviewed against the current regulations and employer facts.
What is the CHOICE affordability percentage for 2027?
For plan years beginning in 2027, IRS Revenue Procedure 2026-26 sets the Section 36B required contribution percentage at 10.22%. The percentage is only one input; the calculation also needs the correct plan year, CHOICE amount, applicable lowest-cost silver plan premium, employee facts, and method.
Does an affordable CHOICE Arrangement eliminate the premium tax credit?
An affordable CHOICE offer can make an employee ineligible for a Marketplace premium tax credit even if the employee opts out. An employee who accepts CHOICE cannot also claim a credit for the individual coverage reimbursed by it. Individual eligibility should be confirmed through the Marketplace and appropriate tax support.
When must an employer send the CHOICE notice?
The notice generally must be provided at least 90 calendar days before the start of each plan year. A different timing rule applies when someone becomes eligible after the beginning of the plan year or after the advance notice was provided. Confirm the exact deadline and required content for the arrangement.
Does completing a CHOICE course make someone qualified to approve a plan?
No. A private course can teach concepts and workflow, but it is not a state license, government credential, plan document, affordability determination, legal or tax opinion, or approval of an employer arrangement.
BUILD FLUENCY BEFORE YOU ADVISE
Practice the CHOICE questions that belong in employer discovery.
Explore uPPo education for CHOICE concepts and employer conversations. Confirm your license, role, and professional support before applying the material to a specific employer.
Sources and important note
This guide is educational and does not guarantee a license, job, appointment, client, income, or regulatory outcome. Requirements and programs change; confirm current rules with the responsible regulator, agency, employer, exchange, or carrier.
- CMS: Employer Initiatives — CHOICE Arrangements
- CMS: Health Reimbursement Arrangements
- U.S. Department of Labor: FAQs on New Health Coverage Options
- U.S. Department of Labor: Individual Coverage HRA Model Notice
- U.S. Department of Labor: Reporting and Disclosure Guide for Employee Benefit Plans
- U.S. Department of Labor: Individual Coverage HRA Model Attestations
- IRS: Health Reimbursement Arrangements and affordability safe harbors
- IRS: Questions and Answers on the Premium Tax Credit
- IRS Revenue Procedure 2026-26: 2027 required contribution percentage
Publication and revision record
Published 2026-08-14. Last modified 2026-09-09. CMS naming reviewed September 9, 2026; technical sources reviewed August 14, 2026.
September 9 naming update: adopted CMS’s CHOICE Arrangements name (formerly ICHRAs) and preserved existing links. Policy-source review remains August 14, 2026; this update does not represent a full regulatory review.
See the editorial and corrections policy.