Short answer: Yes. The new-hire rule lets an employer offer an ICHRA to employees in a class who are hired on or after a set future date, while employees hired earlier keep the group plan. No one in either set gets to choose between the two.
Under 26 CFR 54.9802-4(d)(5), the employer picks a prospective “new hire date” for a class. Employees hired on or after that date get the ICHRA (CHOICE Arrangement); those hired before stay on the traditional group plan. The new-hire subclass must get the ICHRA on the same terms, and the employer may set different new-hire dates for different classes.
This is a way to phase out a group plan gradually without forcing current employees, including some with ongoing treatment, onto individual coverage all at once. The employer can also stop using the rule later.
Points to plan for:
- The group plan shrinks over time as people leave, which can affect the carrier’s participation requirements and the group’s renewal pricing.
- New hires still need the ICHRA notice by the date their HRA can first take effect.
- Offering any employee a choice between the group plan and the ICHRA is not allowed.