Can business owners participate in the ICHRA?

Written by Aimee Reynard
Updated 2 years ago

As a general rule, people who are considered by the Internal Revenue Service to be “self‐employed” cannot participate in certain benefits serviced by Ameriflex. For this reason, the following people are barred by law from participation in ICHRAs: 

  1. Sole proprietors of sole proprietorships*
  2. Partners of partnerships*
  3. Members of LLCs (“member” is the usual term for an LLC owner)*
  4. More‐than‐2%‐shareholders of S‐Corporations** 

*Spouses of sole proprietors of sole proprietorships, partners of partnerships or members of LLCs who are bona fide employees and do not have an ownership interest in the business may also participate. 

** Spouses, children, parents, and grandparents of more‐than‐2%‐owners of S‐Corporations cannot participate in a Subchapter S corporation’s cafeteria plan even if they are bona fide employees. This is because of the ownership attribution rules contained in Internal Revenue Code § 318.

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