Opting Out of a CHOICE Arrangement (Formerly ICHRA): What Happens to Your Premium Tax Credit

Last updated Sep 8, 2026

Naming note: On September 3, 2026, CMS and the SBA renamed ICHRA to CHOICE Arrangement (Custom Health Option and Individual Care Expense).

Your CHOICE Arrangement is affordable if the lowest-cost silver plan for self-only coverage where you live, minus your monthly allowance, costs no more than 10.22% of your monthly household income in 2027.

The affordability test

	CHOICE Arrangement is affordable	CHOICE Arrangement is unaffordable
You enroll	Allowance, no credit	Allowance, no credit
You opt out	No allowance, no credit	Credit, if you otherwise qualify

NOTE: Enrolling always forfeits the credit, even when the CHOICE Arrangement is unaffordable.

How to actually decide

The choice exists only if your CHOICE Arrangement is unaffordable and your household income sits between 100% and 400% of the federal poverty line. Above 400%, no credit exists since the enhanced subsidies expired (Most take the CHOICE Arrangement allowance if this is the case). Below it, compare two numbers: the annual value of the allowance against the annual credit the exchange quotes you.

The mechanics

Your employer's 90-day notice contains the allowance amount and start date. Since the opt-out is annual, you decide for the plan year (not month to month). Gaining the CHOICE Arrangement offer also opens a 60-day special enrollment period, so you can buy individual coverage even outside open enrollment.

FAQ

Can I keep the credit by just not submitting reimbursements? No. Being enrolled in the CHOICE Arrangement blocks the credit regardless of whether you use it. Only a formal opt-out preserves eligibility (and only if the CHOICE Arrangement is unaffordable).

Can I opt out mid-year if my income drops? Generally no. The election holds for the plan year. Income changes affect the size of a credit you already qualify for.

My spouse's employer offers a group plan. Does that change anything? It can. An affordable offer of other employer coverage independently blocks credits for the people it covers. Run each family member's eligibility separately.

Sources

• HHS, Treasury, and DOL final rules on health reimbursement arrangements (June 2019)
• Treasury Regulations under Code section 36B on ICHRA affordability for premium tax credit purposes
• IRS Revenue Procedure 2026-26
• CMS, individual coverage HRA guidance and marketplace application materials

This article is for general information only. It is not tax, legal, or accounting advice, and Benepicks does not provide tax or legal advice. Rules change and individual facts matter. Confirm anything you rely on here with your CPA, attorney, or benefits counsel before acting on it.