Business owner eligibility for an ICHRA
Many business owners wonder if they can save on medical expenses with an ICHRA like their employees do. As with many IRS rules, the answer depends. Let's go over which business owners are eligible to participate.
The IRS recognizes C corporations as separate legal entities from their owners, making C corp owners common-law employees of the corporation. This means they can participate in a ICHRA with their family members. An S corp is a pass-through entity, meaning the IRS taxes business owners and shareholders directly instead of the business. Because of this, shareholders aren’t W-2 employees.
If you’re a shareholder with more than 2% of shares of an S corp, you can’t participate in a ICHRA. Unfortunately, partners and sole proprietors can’t participate in an ICHRA either.
To learn more about ICHRA eligibility, visit PeopleKeep.com. You can also check out our other videos for more benefits and small business tips.
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