Mississippi creates new ICHRA tax credit for small employers

Mississippi just became the second state in the U.S. to pay small businesses to switch to an individual coverage health reimbursement arrangement (ICHRA). Governor Tate Reeves signed House Bill 343 on April 6, 2026, creating a new small business tax credit, which takes effect retroactively to January 1, 2026.

This new tax credit allows small businesses to claim a state income tax credit for up to two years, provided they meet specific criteria. This is a landmark development for ICHRAs, as it makes offering the benefit much more enticing in the Magnolia State.

In this article, we’ll explain everything small businesses need to know about the new Mississippi ICHRA tax credit.

In this blog post, you’ll learn:

• How small employers can claim the new Mississippi ICHRA tax credit.

• Which small businesses qualify for the tax credit.

• How PeopleKeep and Remodel Health help small employers switch to an ICHRA.

What is the new Mississippi ICHRA tax credit?

Mississippi HB 343 allows small organizations with fewer than 50 employees to claim an income tax credit when they offer an ICHRA to their employees. Employers can claim a credit of up to $400 per covered employee in the first year, and up to $200 in the second year¹. However, the amount of the credit can’t exceed an organization’s state tax liability.

To qualify for this credit, the employer must satisfy the following conditions:

• Have fewer than 50 employees
• Be subject to tax liability
• Offer an ICHRA instead of a traditional employer-provided health insurance plan
• In the first year, offer an ICHRA contribution that matches or exceeds either:
• The level of benefits provided in the prior benefit year
• The amount contributed per covered employee to the employer’s previous group plan during the prior benefit year

The state set a limit of $1 million for any fiscal year. This means the state will only provide up to $1 million in tax credits in aggregate to employers per year on a first-come, first-served basis. Therefore, if you wish to claim these new credits, be sure to do so as soon as possible.

If your business doesn’t have much tax liability at the moment, you can still benefit from them. The new law allows employers to carry any tax credits forward for up to ten years.

Employers must report to the Mississippi Department of Revenue every three years after claiming the credit. This allows the state to see whether the employer continued to offer the ICHRA or switched back to a traditional group health insurance plan.

Does this apply to ICHRA or QSEHRA?

You might notice that HB 343 references IRC Section 9831(d). While the bill makes repeated mention of ICHRA by name, Section 9831(d) technically governs the qualified small employer HRA (QSEHRA)². Indiana’s similar tax credit also references this policy, though subsequent guidance shows it applies to both ICHRA and QSEHRA. This mistaken citation could create confusion for those with either benefit.

While the bill specifically names ICHRA, it cites QSEHRA. We expect the Mississippi Department of Revenue to clarify the intentions of this tax credit and either allow employers offering both benefits to take advantage of the credits or restrict it to ICHRA.

How does Mississippi’s ICHRA tax credit compare to Indiana’s?

Mississippi’s new tax credit is remarkably similar to Indiana’s HB 1004, also known as Public Law 203. However, there are some differences.

Indiana was the first state to enact a tax credit for health reimbursement arrangements (HRAs). HB 1004 took effect on January 1, 2024.

Here’s what’s the same:

• Both tax credits offer $400 in the first year and $200 in the second year per covered employee³.
• Both credits only apply to organizations with fewer than 50 employees.
• Both credits require employers to offer the same or a greater contribution than they did with a previous health insurance plan.
• Both states allow employers to carry the tax credit forward for up to ten years.

Here’s how the two tax credits differ:

• Which HRAs the tax credits apply to. As mentioned earlier, Mississippi specifically calls out the ICHRA but cites the code regulating QSEHRA. In contrast, Indiana’s tax credit only mentions HRAs in general, while citing the same QSEHRA code. It remains to be seen whether the Mississippi tax credit will apply to ICHRA only or also support employers offering a QSEHRA, as Indiana does.
• Funding pool. Mississippi caps all claims at $1 million for the year. However, Indiana offers ten times that amount, capping claims at $10 million for all claimants statewide.
• Guidance. The Mississippi tax credit is new, and the state Department of Revenue hasn’t issued further guidance. The Indiana credit is two years old, and the Indiana Department of Revenue has issued additional guidance on how the tax credit applies to employers that haven’t offered any benefits before, among other situations. It remains to be seen whether Mississippi will follow Indiana’s lead or differ in its guidance.

With similar language, employers are expected to take advantage of these new credits just like they did in Indiana.

“We saw in Indiana how the right incentive turned curiosity into adoption and adoption into momentum,” Reid Zimmerman, Vice President of Direct Sales for Remodel Health, said. “Employers who once hesitated are now leading with confidence, offering personalized benefits at scale. I expect Mississippi to follow a similar arc.”

Zimmerman believes that aligning smart legislation with modern health benefits strategies isn’t an incremental change; it’s a redefinition of how employers compete for and care for their people.

The growing legislative momentum for ICHRA

Mississippi’s new ICHRA tax credit signals a growing trend taking shape. Policymakers at all levels of government are showing increased interest in ICHRA.

While Indiana and Mississippi are the only states to pass a tax credit as of April 2026, many other states have introduced legislation to do so. This includes Ohio, Texas, Georgia, and Connecticut. Although most of these bills remain stalled, their introduction is significant. Legislators across the country are recognizing that ICHRA can help solve affordability issues for small employers.

The ICHRA also has bipartisan support. HB 343 didn’t just pass. It passed by a bipartisan landslide of 118-0 in the Mississippi House, with four no votes, and 45-4 in the Senate⁴.

Additionally, Congress has introduced bills to codify ICHRA as the CHOICE Arrangement three times in recent years, with two of those attempts in 2025. This shows widespread support for the future of ICHRA.

Learn more about the state of tax credits for HRAs in our article.

Why offer an ICHRA over traditional group health insurance?

An ICHRA is a tax-free alternative to traditional group health insurance for organizations of all sizes. Instead of offering a one-size-fits-all group plan that comes with steep annual rate increases and minimum participation requirements, you can offer a defined contribution for employees’ individual health insurance premiums and qualified out-of-pocket medical expenses.

Employers get cost control and predictability by setting their maximum allowance for the year. Since individual plans are community-rated instead of experience-rated, an employee’s large medical claims won’t impact their premiums. This tends to limit rate increases on the individual market.

For small employers, ICHRA is a lifeline. It provides cost savings over group coverage, especially for those with large medical claims. It also helps those who can’t offer a group plan due to strict minimum participation requirements. While group plans generally require a set percentage of your staff to opt into the benefit, usually around 70%, the ICHRA has no such requirement.

For geographically distributed workforces, the ICHRA allows you to customize your benefits. Instead of offering multiple group plans or giving out-of-state employees the same plan as in-state employees, you can vary allowances by geographic location. This allows employees to choose plans in their areas that meet their needs.

Finally, the ICHRA also benefits employees. With it, they can enroll in qualified individual health insurance plans that best fit their needs and locations. Employees have control over their network, out-of-pocket costs, and more.

How PeopleKeep and Remodel Health can help you offer an ICHRA

Mississippi’s new tax credit might make an ICHRA more appealing to small employers in the state. But legislation alone doesn’t help employers make the transition to an HRA. Whether you’re a small business launching benefits for the first time or a growing company ditching a group plan, Remodel Health is here to guide you through your ICHRA journey.

For the new-to-benefits employer

For small employers with fewer than 50 employees who are new to benefits, PeopleKeep by Remodel Health specializes in helping you offer HRAs with ease. Our ICHRA administration software helps you offer a cost-effective benefit to your team in just minutes each month.

We handle the plan documents, employee notices, and review your employees’ coverage and reimbursement requests to maintain IRS compliance. Your employees can also enroll in qualifying individual plans right from their PeopleKeep dashboards.

For the strategic transition away from group coverage

Transitioning from a traditional group plan to an ICHRA is a strategic move, but it often requires a guide. If your organization currently works with a group broker and is looking to transition to an ICHRA, Remodel Health’s ICHRA+ platform offers hands-on support and guidance. We work alongside you and your broker to model exactly how much you’ll save by switching. You’ll also get access to AutoPay for employee premiums and compliance support.

Between PeopleKeep and Remodel Health, we’ve managed thousands of HRAs and helped employers navigate the very first state-level credits in Indiana.

Conclusion

The ICHRA revolution has arrived in the Magnolia State. Mississippi’s HB 343 is more than just a tax break; it’s a clear signal that the state is backing a more flexible, employee-centric future for healthcare. With a ten-year carry-forward and up to $400 per employee in the first year, small employers can save money while giving employees more choice and control over their healthcare.

Whether you are a startup launching your first benefits package or a growing company looking to escape the volatility of traditional group renewals, the combination of PeopleKeep’s streamlined automation and Remodel Health’s enterprise-level strategy ensures you have a trusted administrator who can scale alongside you.

Don’t wait until the $1 million cap is reached. Schedule a call with a PeopleKeep HRA specialist today to see if an ICHRA is right for you.

References

1. Mississippi House Bill 343
2. 26 U.S. Code § 9831
3. Indiana Department of Revenue, Income Tax Information Bulletin 122
4. Mississippi State Senate