Union employees can be their own ICHRA class, but only where the agreement supports it.
Employees in a unit covered by a particular collective bargaining agreement can be a separate class. Reading every agreement before drawing class lines prevents expensive mistakes.
What to check in each agreement.
List Every Agreement
Make a complete list of agreements, covered employees and expiration dates before designing classes.
Particular Agreement
The union class is a unit covered by one particular agreement. Counsel should confirm each agreement.
Multiemployer Plans
Employees covered by a multiemployer plan follow that plan terms and need separate review.
Timing With Expiration
A new allowance usually begins at an agreement expiration or renewal. Match notice dates to that calendar.
Employees Outside the Agreement
Non-union employees at the same site may be in a different class with a different allowance.
Communication
Union representatives usually want to hear about benefit changes early. Plan the messaging.
Where Bargaining Meets the Class Rules
The union class is defined by the agreement. The planning questions are what the rules allow around that class, how much the allowance may vary, and when the calendar lets a change happen.
What the rule says about the union class
A plan sponsor may treat as a class the employees included in a unit covered by a particular collective bargaining agreement. Classes can be combined, so a sponsor can define a class such as hourly employees covered by one agreement. The sponsor chooses the classes before each plan year and cannot change them during that year.
Source: 26 CFR 54.9802-4(d)(2).
What a sponsor can and cannot do around it
| Situation | What the regulation provides |
|---|---|
| A group plan for the union unit and an ICHRA for non-union staff | Allowed. Different classes can be offered different coverage |
| Both a group plan and an ICHRA offered to the same class | Not allowed, with the exception of the new hire subclass |
| New hires after a future date get an ICHRA while earlier hires keep the group plan | Allowed for hires on or after a date set in advance, no earlier than January 1, 2020, on the same terms within the subclass, with no choice between the two |
| Allowance amounts within one class | Same for everyone in the class, with permitted variation by number of dependents and by age |
Source: 26 CFR 54.9802-4(c) and (d)(5). The minimum class size test lists the full-time, part-time, salaried, hourly and rating-area classes; how it applies to a combined class that includes a union unit should be confirmed with counsel.
How much the allowance can vary
Within a class the maximum allowance may rise with the number of dependents, and with age, as long as everyone of the same age gets the same amount and the oldest participant’s maximum is not more than three times the youngest’s. If the youngest participant receives $400 a month, the oldest could receive up to $1,200. The age method must be reasonable, uniform and set before the plan year.
Illustrative figures. Source: 26 CFR 54.9802-4(c).
The labor law side
Health benefits for active employees are generally treated as part of the terms and conditions of employment that an employer must bargain over, and an employer generally may not change them unilaterally while the duty to bargain applies. That is why the agreement calendar and the notice calendar both matter. For a plan year starting January 1, 2028, the federal notice must reach employees by October 3, 2027, so any bargaining that changes the benefit has to be settled before that date.
Sources: NLRB v. Katz, 369 U.S. 736 (1962) and 29 U.S.C. 158(d). Labor counsel should review each agreement before any change.
The questions employers ask about ICHRAs and unions.
Can union and non-union employees have different allowances?
Yes, when union employees are a separate class under the rules. Every employee in a class must be treated the same.
Do I need union approval to offer an ICHRA?
That depends on the agreement. Counsel should review the bargaining terms before any change.
Can I leave union employees on the group plan?
Yes, if they are in their own class. Other classes can use an ICHRA.
What about multiemployer plans?
Those follow the plan terms and need separate review.
When can the change start?
Often at an agreement expiration or when the parties agree. Match the 90-day notice to that date.
Does this apply to public employers?
Public employers also deal with bargaining and Public Act 152. See our Michigan public employer page.
Who reviews the agreements?
We read them with you and bring in counsel on any close call.
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.
Class Assignment
Sort each employee group into a permitted class.
Public Act 152 Cap Options
Fit an allowance inside the Michigan limits.
Board Calendar Timing
Count back from the plan year.
ICHRA for Construction and Skilled Trades
Union carve-outs and mobile crews.
ICHRA for Michigan Public Employers
Boards, unions and Public Act 152.
ICHRA for Manufacturing
Plants, shifts and bargaining units.
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