A QSEHRA is a Qualified Small Employer Health Reimbursement Arrangement.  It is an employer-funded, tax-deductible plan that allows smaller employees (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.

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

Be competitive in the job market by offering this benefit and recruit and retain the best employees.

Benefits selected to help employees with out of pocket costs is shown to increase job satisfaction and improve retention rates for your employees.

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
–Union employees
–Non-resident aliens

• 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 2022 under the Qualified HRA is $5,450 for the employee-only, or $11,050 for family coverage.
• 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.

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.

Benefits selected to help employees with out of pocket costs is shown to increase job satisfaction and improve retention rates for your employees.