Qualified Small Employer Health Reimbursement Arrangement
(QSEHRA)
The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) helps employers offer their employees a more attractive benefits package. Employers can help their employees pay for medical coverage for themselves and their families, tax-free. The employees can use the money for insurance premiums, co-pays, deductibles, eye care, dental care, or any other qualified healthcare expense. The amount provided is tax-free to the employees and 100% tax deductible to the employer.
With a QSE HRA, employees have the ability to secure their own medical insurance either on or off the marketplace. This allows the employee to have an active role in finding the right medical coverage for their situation.
Who is a Qualified Small Employer HRA for?
- Employer must have less than 50 Full-Time Equivalents (FTEs) employees
- Employer must not offer a Group Health Plan to its employees
- Employer decides on the benefit amount to offer and the amount is funded solely by the employer. The employer can set different benefit limits for self-only versus family coverage, up to the annual maximum established by the IRS.
- Determine eligibility and other administrative details to provide all required notification to employees with the help of Benefit Providers and its administrative partners, while will include meeting specific timeframe requirements.
- Employees must secure medical insurance that meets the minimum essential coverage definition and provide proof of coverage in order for reimbursement to be tax-free.
- Employees must submit any documented healthcare expense under Code Section 213(d), including individual health insurance premiums, to our administrative partners.
- We will work with employers to handle reimbursements and assist in the reporting requirements.
Benefit to Employer
Employee Satisfaction
Attract and retain talented employees with an increased benefit package.
Tax Benefit
All reimbursements are 100% deductible as a business expense.
Controlled Funding Limits
Employer determines benefit amount and only pays when an expense is substantiated. No prefunding is required.
Peace of Mind
All legal and administrative concerns are taken care of by our administrative partners.
Benefit to Employee
Cost Saving
Employees now have additional money to help with the rising cost of healthcare.
No Taxes
All reimbursements are considered non-taxable income.
Convenience
Easy way to get reimbursed for healthcare expenses.
FAQs
Small employers with fewer than 50 full-time equivalent (FTE) employees AND who do not offer a group health plan to any of their employees can offer QSEHRAs to their staff. An FTE employee is one who works 130 hours per month, or 30 or more hours per week for 120 consecutive days.
No. The Cures Act does not apply to small employers who offer a group health plan.
As defined in Section 213(d) of the Internal Revenue Code, a QSEHRA can cover the cost of any documented healthcare expense. In addition, employees can use their QSE HRA to help pay for individual health insurance premiums. One thing to keep in mind is that all covered costs, including medical expenses and insurance premiums, must be documented.
Like a regular HRA, a QSEHRA is funded solely (100%) by the employer. Therefore, employees cannot contribute, and the employer’s contributions are not deducted from the employee’s pay.
Yes. For tax years beginning in 2019, small businesses can offer QSEHRAs with the following limits: For self-only employees, the employer may contribute a maximum of $5,150 annually ($429.17 monthly). For employees with a family, the employer may contribute a maximum of $10,450 annually ($870.83 monthly).
For employees who become eligible for the QSEHRA midyear, the limits must be prorated to reflect the total amount of time the employee is eligible.
Employees must purchase a health plan that has minimum essential coverage (MEC), as stated by the ACA.
If an individual purchases health coverage without MEC, then they may be taxed and reimbursements from the QSEHRA may be included in their gross income.
Full-time employees who wok 130 hours per month, or 30 or more hours per week for 120 consecutive days. Generally, all employees must be offered coverage under the same terms with some exceptions.
Yes, some employees may be excluded. Employers may exclude the following from receiving a QSEHRA:
- Seasonal employees
- Part-time employees
- Workers who are covered by a collective bargaining agreement in which accident and health benefits were the subject of good faith negotiations
- Employees with less than 90 service days
- Employees who are under the age 25
- Certain non-resident aliens
Yes. For employees who obtain health insurance through a public exchange and qualify for subsidized coverage, they must report the amount in the QSEHRA to the exchange. Their federal subsidy amount will be reduced by the amount in the HRA benefit.
For example, if John Doe qualifies for a $2,000 annual subsidy, and he receives $1,500 in the QSEHRA, then Mr. Doe’s subsidy is reduced by $1,500.
No. Since a QSEHRA is not a group insurance coverage, employers are not required to offer COBRA coverage or ERISA.
Employers may start offering QSEHRAs on or after January 1, 2017. Employers must notify their employee upon eligibility for individuals who become eligible during the year.
Yes. Employers must provide a written notice to their workforce before the start of the plan year with the following information:
- Amount in the QSEHRA benefit
- Informing employees to notify the exchange of the QSEHRA if they apply for a subsidy
- Consequences of not getting MEC, which may result in taxes and the inclusion of reimbursements in their gross income.
Employers must also include the amount of available QSEHRA benefits on their employees’ W-2s at the end of the year.
In order to get reimbursed for their medical or insurance expenses, employees must provide “proof of coverage” to their employer.