IRS Sec. 105(h) prohibits discrimination in relation to benefits, in both plan design and plan operation. To be nondiscriminatory in design, employers must provide uniform contributions to all participants, and amounts cannot vary based on age or length of service. If the plan fails this nondiscrimination requirement, the excess reimbursements become taxable to the highly compensated individuals (HCIs). 

The ICHRA rules provide certain exceptions to this nondiscrimination requirement. If the ICHRA provides reimbursement for individual insurance premiums only, it does not have to meet discrimination rules. Also, contributions may increase based on the number of dependents covered and based on the participant’s age—as long as the oldest participants do not receive an amount greater than three times what the youngest participants receive.