A single average headcount hides the real cost of an ICHRA when hiring swings with the season.
Seasonal, project and enrollment-driven employers see headcount move through the year. Modeling the allowance at peak, at the low point and as the company grows shows what the arrangement really costs.
What to model.
Peak Headcount
Model the highest headcount the business reaches, not the year-round average.
The Low Point
Model the slowest period too, so the budget works when hiring is light.
Cost by Location
Allowances can differ by rating area, so total cost depends on where employees work.
Growth
If the company is hiring, project the monthly cost for the headcount you expect, not the one you have.
Eligible Employees Only
Count only employees in an eligible class, after any waiting period.
Compare With Today
Put the modeled cost beside what you pay now, class by class.
Modeling an Allowance at Peak and Slow Season
An employer with seasonal staff pays a different allowance bill each month. The model has to show both the cash cost and the effect on the large employer count.
The monthly cost
| Base staff | Seasonal staff | Monthly cost | |
|---|---|---|---|
| Headcount | 40 | 25 | |
| Allowance per person per month | $500 | $350 | |
| Peak month, all employed | $20,000 | $8,750 | $28,750 |
| Slow month, base staff only | $20,000 | $0 | $20,000 |
Illustrative figures.
The annual cost depends on how long the peak lasts
| Peak length | Peak months | Slow months | Annual allowance cost |
|---|---|---|---|
| Four months | 4 at $28,750 is $115,000 | 8 at $20,000 is $160,000 | $275,000 |
| Five months | 5 at $28,750 is $143,750 | 7 at $20,000 is $140,000 | $283,750 |
Illustrative figures.
The large employer test
An employer is an applicable large employer when its average monthly count of full-time employees and equivalents over the prior year is 50 or more, with any fraction rounded down. A seasonal exception applies only if the count exceeds 50 for 120 days or fewer, and four calendar months are treated as 120 days. Using the same workforce, and treating every worker as a full-time employee for simplicity, a four-month peak produces an average of 48.33, which rounds down to 48 and is below 50. A five-month peak produces 50.42, which rounds down to 50, and the seasonal exception is not available because the peak runs longer than four months.
| Peak length | Months at 65 | Months at 40 | Average count | Large employer? |
|---|---|---|---|---|
| Four months | 4 | 8 | 48 | No |
| Five months | 5 | 7 | 50 | Yes |
Illustrative. Sources: 26 CFR 54.4980H-2(b)(1), (b)(2) and (c). Full-time equivalents are computed from part-time hours, so a real count differs from this simplified one.
The questions employers ask about modeling ICHRA cost.
How often should I rerun the model?
Before each notice and whenever headcount changes materially.
Does the allowance cost change with headcount?
Yes. The cost is the allowance times the number of eligible employees, so it moves with hiring.
Does a waiting period reduce the cost?
It delays the allowance for new hires, which lowers cost in months when many are new.
How do I budget for a seasonal business?
Model peak and off-peak months separately and budget to the combined year.
Can allowances rise with age?
Yes, within limits the rules allow, which changes the total.
What data do you need?
A current employee list with class, location, age and status. A census works.
Is the model binding?
No. It is a planning tool, and the allowance is set in your plan documents.
General information about individual coverage HRAs, not legal or tax advice. Plan-specific questions belong with ERISA counsel and your tax advisor, and we will bring them in.
Where these details come from.
This page summarizes public guidance reviewed in October 2026. Rules change, so confirm current requirements with counsel.
CMS: Individual Coverage HRAs →
U.S. Department of Labor: Employee Benefits Security Administration →
More ICHRA questions and the industries they affect.
Affordability by Class
Test the ACA affordability rule class by class.
ICHRA or Keep the Group Plan
When each one fits.
Hours and Mid-Year Changes
Measuring hours and status changes.
ICHRA for Restaurants and Hospitality
Tipped, hourly and seasonal staff.
ICHRA for Construction and Skilled Trades
Union carve-outs and mobile crews.
ICHRA for Retail
Part-time and seasonal store teams.
ICHRA vs QSEHRA vs HRA
How the three arrangements differ.
ICHRA Pros and Cons
What employers gain and what they take on.
Send us your renewal.
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Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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