Nonprofits can use an ICHRA, and fixed grant and reimbursement budgets are a good reason to.
A nonprofit sets allowances by class like any employer. The practical questions are budget certainty, lower-wage roles and how funding sources view benefit costs.
What nonprofits should check.
Open to Nonprofits
Employers of all sizes can offer an ICHRA, including nonprofits.
Fixed Budgets
Grants and contracts often fix what can be spent. A set allowance per class makes benefit cost known.
Lower-Wage Roles
Entry-level roles make the affordability test harder. Test those classes first.
Part-Time and Program Staff
Part-time and grant-funded staff can be their own classes where a permitted class fits.
Funder Rules
Some funders limit what benefits can be charged. Check grant terms before changing.
Board Approval
Boards often approve benefit changes. Build that into the calendar.
ICHRA Costs and Federal Grant Rules
A nonprofit that charges payroll to grants has to show where each benefit dollar goes. An ICHRA changes the dollar and the way it is allocated.
The grant cost rule
Under the federal Uniform Guidance, fringe benefit costs, including employee health insurance, are allowable when they are reasonable and are required by law, by an organization-employee agreement, or by an established written policy. They must be allocated consistently with the pattern of benefits the employees receive. They may be assigned to specific employees or allocated using the entity’s salaries and wages, and where the second method is used, separate allocations are required for groups of employees unless the costs do not differ significantly among them.
Source: 2 CFR 200.431(a), (c) and (d). This applies to federal awards; other funders have their own rules.
An illustration for a 25-employee nonprofit
| Scenario | Annual employer cost | Share charged to grants at 60 percent | Charged to other funds |
|---|---|---|---|
| Group plan at $550 a month per employee | $165,000 | $99,000 | $66,000 |
| ICHRA at $450 a month per employee | $135,000 | $81,000 | $54,000 |
Illustrative figures. If the ICHRA allowances differ by class, the nonprofit should check whether one fringe rate still reflects the cost for each group of employees.
What to put in the file
- The written plan document and board approval, which are the established policy the rule asks for.
- The cost model by class.
- The allocation method, and the reason one rate is or is not enough.
- The effective date, so a mid-year change is traceable in the books.
Grant allocation questions belong with the nonprofit’s accountant and the grant manager.
The questions nonprofits ask about ICHRAs.
Can a nonprofit offer an ICHRA?
Yes. Employers of all sizes may offer one.
Do grants limit benefit spending?
They can. Check grant terms before changing benefits.
Does the affordability test apply?
Larger employers must pass it, and it affects premium tax credits for everyone. Test every class.
Can grant-funded staff be a separate class?
Only if a permitted class fits, such as part-time or salaried. Counsel should confirm.
Who approves the change?
Often a board. Add its meeting dates to the calendar.
Is there a social services page?
Yes. Our home health and social service page covers agencies in detail.
Can you model a nonprofit allowance?
Yes. We model each class against your actual headcount and budget.
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.
Government Billing Rates
How the allowance reaches billing rates.
Board Calendar Timing
Count back from the plan year.
Class Assignment
Sort each employee group into a permitted class.
ICHRA for Child Care and Early Education
Teachers, aides and school-year schedules.
ICHRA for Home Health and Social Services
Field staff and variable schedules.
ICHRA for Medical and Dental Practices
Clinical staff, owners and associates.
Send us your renewal.
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Your current plan summary
Contribution split by tier
Enrolled counts by tier
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