CHOICE Arrangements: What the ICHRA Rename Means for Employers
In September 2026 the federal government began calling the individual coverage health reimbursement arrangement a CHOICE Arrangement. It is the same benefit with a new name, so the rules you modeled last year still apply. Here is what changed, what did not and how to use both names.
The name changed in September 2026, and the rules did not
Employers will now see both names in carrier, vendor and government materials. They refer to the same arrangement.
The New Name
CMS and the Small Business Administration announced the CHOICE Arrangement name on September 3, 2026. CMS now states on its CHOICE page that CHOICE Arrangements were previously known as individual coverage health reimbursement arrangements.
What Did Not Change
The 2019 tri-agency regulation still governs the arrangement, and IRS and DOL guidance and model notices still use the term individual coverage HRA. Existing plan documents, notices and payroll setups that use the ICHRA name remain the legal reference.
What Is Still Pending
Bills that would have written the arrangement into law, renamed it and changed some of its rules did not become law. Do not plan around those changes until they do.
A CHOICE Arrangement gives employees a tax-free allowance to buy their own coverage
The Allowance
The employer sets a fixed monthly amount and the employee uses it to buy individual health insurance. Employers can reimburse premiums only, or other qualified medical expenses too.
Employee Classes
Employers choose which classes of employees are eligible from the classes in the rule, such as full-time, part-time, salaried, hourly or by location. A class cannot be offered both a group plan and a CHOICE Arrangement.
Age and Family Variation
Contributions can vary by employee age, with the oldest employee amount capped at three times the youngest, and by the number of dependents. This is how employers keep the allowance fair across a mixed workforce.
Cafeteria Plan Pairing
Employees can pay their share of premiums pretax by pairing the arrangement with a Section 125 cafeteria plan. CMS notes this generally does not work for Marketplace coverage bought through the exchange.
Three requirements do not move with the name
The 90-Day Notice
A written notice must reach eligible employees at least 90 days before the plan year begins. For a January 1 plan year that date has already passed for 2027, so employers that missed it should plan around a later plan year start.
Affordability for Large Employers
Applicable large employers still test whether the arrangement meets the ACA affordability rules to avoid penalties. Run the test before setting the allowance.
Administration
Many employers use a third-party administrator for reimbursements and compliance. CMS publishes a list of administrators that support the arrangement and says it is not an endorsement.
Three steps get your materials and your decision in order
1. Use Both Names
Add the CHOICE Arrangement name next to ICHRA in your enrollment materials and employee communications so employees searching either term find the same answer.
2. Model It Against a Group Plan
Compare the cost and fit of an allowance with your group plan for the classes you would cover, using real census data.
3. Keep Documents Consistent
Plan documents, notices and vendor agreements can say CHOICE Arrangement, individual coverage HRA or both. Pick one convention and use it everywhere.
Common Questions
Is a CHOICE Arrangement the same as an ICHRA?
Yes. CMS states that CHOICE Arrangements were previously known as individual coverage health reimbursement arrangements. The rename is a rebrand and outreach effort, and the rules are unchanged.
Do we need to amend our ICHRA plan documents?
The announcement did not change the regulation, and IRS and DOL guidance still use the term individual coverage HRA. Review your documents with your adviser, but the rename alone does not require an amendment.
Can we offer both a group plan and a CHOICE Arrangement?
Yes, to different classes of employees. The same class cannot be offered both.
Can CFH model a CHOICE Arrangement for us?
Yes. Book a free 30-minute call and we will compare an allowance with your current group plan using your census.
Where These Rules Come From
26 CFR 54.9802-4, Individual coverage health reimbursement arrangements
IRS, Affordable Care Act information for employers
CFH are licensed insurance brokers, not attorneys or tax advisors. This page is general information, so confirm your situation with your benefits attorney or tax advisor.
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