Small Employer Health
employer HRAs or QSEHRAs
(Qualified Small Employer Health Reimbursement Arrangements)
allow small businesses without group health plans to set aside
money, tax-free, for employees to use toward medical expenses
- including the cost of buying health insurance. Here's what
you need to know about QSEHRAs.
Included in the 21st Century Cures Act enacted by Congress on
December 13, 2016, was a provision for QSEHRAs, which permit
an eligible employer to provide a qualified small employer
health reimbursement arrangement (QSEHRA), which is not a
group health plan and thus is not subject to the requirements
that apply to group health plans. QSEHRAs must meet several
criteria such as:
the arrangement is funded solely by an eligible employer, and
no salary reduction contributions may be made under the
the arrangement generally is provided on the same terms to all
eligible employees of the employer;
the arrangement provides, after the employee provides proof of
coverage, for the payment or reimbursement of medical expenses
incurred by the employee or the employee's family members; and
the amount of the payments and reimbursements for any year do
not exceed $4,950 for employee-only arrangements or $10,000
for arrangements that provide for payments and reimbursements
of expenses of family members. These amounts are adjusted for
inflation annually for tax years after 2016. For 2018, the
maximum dollar amount for employee-only arrangements is $5,050
($4,950 in 2017). The maximum dollar amount for arrangements
that provide for payments and reimbursements for expenses of
family members is $10,250 ($10,050 in 2017).
WHICH EMPLOYERS QUALIFY?
Any small employer from a startup to a nonprofit that doesn't
offer a group health plan is able to set up a QSEHRA as long
as they meet certain rules (see below). Small employers are
defined as an employer that is not an applicable large
employer (ALE). An applicable large employer is defined as one
that employs fewer than 50 full-time workers, including
full-time equivalent employees, on average.
|Tip: If a
small employer currently offers a group health plan but
wants to set up a QSEHRA, the group health plan must be
canceled before the QSEHRA will start.
ARE THERE ANY OTHER
One of the most important rules is that in order for employees
to participate in a QSEHRA, they must have health insurance
that meets minimum essential coverage. That is, indemnity,
short-term health insurance, and faith-based insurance plans
(e.g., Liberty HealthShare) do not qualify. Health insurance
plans purchased through the Marketplace meet this
qualification. Employers may choose whether to reimburse
employees for both medical expenses and health insurance
premiums or just premiums.
Furthermore, while there are no minimum monthly contribution
limits, there is an annual maximum contribution limit. For
2018, the limit is $420 per month for individuals
and $854 per month for families.
QSEHRAs are funded entirely by the employer. As such,
employees are prohibited from making contributions.
WRITTEN NOTICE TO
Eligible employers are required
to provide written notice to eligible employees at least 90
days before the beginning of a year for which the QSEHRA is
provided. In the case of an employee who is not eligible to
participate in the arrangement as of the beginning of the
year, the written notice must be furnished on the date on
which the employee is first eligible. The written notice must
a statement of the amount that would be the eligible
employee's permitted benefit under the arrangement for the
a statement that the eligible employee should provide that
permitted benefit amount to any health insurance exchange to
which the employee applies for advance payments of the premium
tax credit; and
a statement that if the eligible employee is not covered under
minimum essential coverage for any month, the employee may be
liable for an individual shared responsibility payment
(eliminated for tax years starting in 2019) for that month and
reimbursements under the arrangement may be includible in
QUESTIONS ABOUT QSEHRAS?
If you have any questions about QSEHRAs or are wondering
whether your small business would benefit from a QSEHRA, don't
hesitate to call. Help is just a phone call away at
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