It depends, in order for a business owner to be eligible to participate in an ICHRA Health Care Plan, they must be considered an employee of the business. Here is the breakdown of the different types of business structures.
Sole Proprietorship – Sole proprietors can not make pre-tax contributions into their own ICHRA Account. If the sole proprietorship has employees, they can implement a Section 125 Plan (a written plan that offers employees a choice between receiving their compensation in cash or as part of an employee benefit) and allow for employee contributions on a pre-tax basis, but the sole proprietor would not be allowed to participate in the plan on a pre-tax basis.
C-Corp – A Section 125 Plan is required to fund pre-tax benefits, including ICHRAs. All employees of the C-Corp (shareholder or not) can participate in the plan.
S-Corp – Any owner and their spouse or shareholder who owns >2% is ineligible to receive pre-tax contributions, thus unable to participate in an ICHRA. Anyone in this designation is considered an “owner” from an IRS perspective and, as such, must receive contributions on a post-tax basis. Because of Section 318 Attribution Rule, a child that is more than a 2% shareholder of an S-Corp would be considered self-employed and ineligible to participate in any 105 Vehicle. Therefore, if a 50 year old employee is a "child" of a 2% or greater shareholder they can not participate.
Nonprofits – Nonprofits can provide ICHRAs to employees.
Partnerships – Partnerships, including LLCs and LLPs, must be taxed as a corporation to make pre-tax contributions. If the partnership is not taxed as a corporation and it has employees, then it can implement a Section 125 Plan and allow for employee contributions on a pre-tax basis but the owners of the partnership would not be allowed to participate in the plan (on a pre-tax basis).
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