QSEHRA: Qualified Small Employer Health Reimbursement Arrangement
HRA for Smaller Business Employers: What is a QSEHRA?
The QSEHRA is an employer-funded, tax-deductible plan that allows smaller business employers (under 50 employees) to offer pre-tax assistance to employees toward the cost of individual health insurance premiums, as well as, out-of-pocket medical, dental and/or vision expenses.
A QSEHRA makes it easier for small business owners and their employees to manage healthcare costs.
Is your business eligible to offer the Qualified Small Employer HRA – QSEHRA?
- Do you have less than 50 full-time employees?
- Are you not currently offering a group health plan?
Why Use A Qualified Small Employer Health Reimbursement Arrangement – QSEHRA?
1. Small Business Employer Cost Savings
Fewer than half of all small businesses offer group medical plans to their employees, mainly due to cost. Many of these employers are small, family businesses with employees who have access to group insurance elsewhere. The main reason to utilize a QSEHRA is to allow an employer to offer a way to offer tax-free assistance to employees toward the cost of their health insurance premiums, as well as, medical, vision and/or dental out of pocket expenses. Offering a QSEHRA provides assistance to employees without taking on the full burden and cost uncertainties of offering group health insurance. Eligible companies can now offer a standalone option to their employees, without being subject to the excise tax imposed by the Affordable Care Act. Also, HRS allocations not utilized by an employee revert to employer.
- Payroll Tax Savings (no FICA)
- Avoid Cost Uncertainties
- Budgetary Control Through Fixed Amounts
- Unused HRA Allocations Revert Back to Employer
2. Competitively Recruit Top Talent
- Be competitive in job market
3. Employee Job Satisfaction, Morale and Retention
- Increases job satisfaction and retention rates of top talent
What are the employer requirements?
A Qualified HRA must be offered to all eligible employees, on the same terms. However, certain variables can determine a larger benefit for certain employees, including:
- An employee’s age and / or
- Number of covered family members
- Price of an insurance policy in the relevant individual health insurance market
The following employees can be excluded:
–Less than 90 days of service with the company
–Under age 25
–Part-time or seasonal employee
- Premiums paid to purchase other health coverage, such as through a spouse’s employer plan, are not eligible for reimbursement under a QSEHRA.
- The maximum reimbursement allowed for 2018 under the Qualified HRA is $5,050 for the employee-only, or $10,250 for family coverage. Amounts are pro-rated for partial year coverage (both new hires and terminees) and indexed in future years.
- Employees who receive HRA contributions in the small-employer category, are ineligible for premium tax credits if the monthly premium for self-only coverage for the second-lowest cost Silver Level (70% actuarial value) plan in their “relevant individual insurance market” is less than one half of 9.5% of the employee’s household income, minus the HRA premium contribution. If coverage is not affordable for the employee under this formula, they may qualify for a premium tax credit. However, it will be reduced by the amount of the HRA.
- An employee must maintain minimal essential coverage in order to take advantage of the tax benefit of the Qualified HRA. Otherwise, the employee reimbursements are subject to tax.
- Employees / Participants may not be eligible for subsidies under an exchange while they are covered under the employer’s HRA.
- The employer cannot offer group health coverage to any Employee.
- Employers must provide written notice to each eligible employee, which must include:
–Amount of the allowed benefit for the year, based on the Qualified HRA
–Statement that employees who choose to apply for advance payment of the premium tax credit for health insurance on the Marketplace, are required to inform the Marketplace of the amount permitted benefit under the Qualified HRA.
–Statement that if the employee is not covered under minimum essential coverage for any month, that employee may be subject to a tax under Code Section 5000A, and reimbursements under the Qualified HRA may be considered taxable income.
- The employer is responsible for funding 100% of the Qualified HRA.
- Employee salary reductions or contributions are not permitted.
- Employers must report the benefit available under the QSEHRA on each employee’s Form W-2 beginning with the 2017 calendar year. Additional IRS guidance on reporting is expected.
- Employers must verify that the employee is covered under either an individual or group health plan that meets the minimum essential coverage requirement of the ACA.
How Does QSEHRA Impact COBRA?
- Qualified HRAs will not be considered as a group health plan for purposes of COBRA continuation coverage. Once employment is terminated or a qualifying event occurs, employers are not required to provide a COBRA notice or continued coverage under the Qualified HRA.
How The Harrison Group helps you with your QSEHRA
- Small Business Experts
Many of our smaller clients, like you, understand that one size does not fit all. We offer customized solutions to meet your specific objectives and budget.
- A Partner with Proven Expertise
With over 30 years of experience in the industry, our clients have come to rely on us to partner with them to provide the necessary education and benefits plan consultation.
- Customer Service is our FOCUS.
Your employees will need to devote a little bit of time paying for these out of pocket expenses and/or submitting claims for their health reimbursement arrangements. Recent studies show that only 44% of employees fully comprehend their benefits. It is critical to select an HRA administrator who not only answers the phone, but also assists employees when they have questions. We offer considerable resources to provide both onsite and online education for your employees.
- Technological Advances
We offer the latest in industry-leading technology to our clients including a web and mobile application for accurate claims submission. We also offer online education for employers and their employees.
Click HERE for a quick info sheet on QSEHRA and check out how we helped one of our clients save money.
If you have questions, please give us a call or contact us online. We will be happy to assist you.