A defined-contribution approach means the employer commits a fixed dollar amount per employee toward benefits rather than promising a specific plan, and employees apply that amount to options they choose. An ICHRA is the clearest example; it makes the employer’s cost predictable.
Contribution Strategies and Cost Controls
How an employer structures its premium contributions affects both cost and participation. These FAQs cover contribution strategies and tools for controlling benefit costs.
Can an employer contribute different amounts to different employees?
Yes, within limits. Employers can vary contributions by legitimate employment-based classes (such as full-time vs. part-time or job category) but not in ways that discriminate in favor of highly compensated employees or owners. Section 125 and Section 105(h) nondiscrimination rules apply.