Why QSEHRA rocks our world.
Every year companies battle to find a health solution that magically covers all of their employee needs. But the problem is employees are different. Families are different. Health situations are different. So there isn't a one-size-fits-all answer to health insurance. Enter QSEHRA, a better health solution for employers and employees alike!
Employers determine exactly how much money they can afford to provide employees for healthcare, tax-free. The money can be used for both premiums and most out-of-pocket medical expenses including dental, vision, and chiropractic care.
This is great news for the employee as well! Rather than sacrificing their beloved primary care physician or paying for a plan that doesn't suit their needs, employees are now given the opportunity to find the exact plan that they want with the reimbursement money the QSEHRA provides!
Gone are the days of traditional, one-size-doesn't-fit-all health plans with huge renewals every year. By implementing a QSEHRA, companies can provide more benefits than a traditional health insurance plan, while simultaneously offering the flexibility employees need to find the right plan for their family. Everybody wins!
What is BeniComp QSEHRA?
QSEHRA (pronounced Q-SARAH) stands for Qualified Small Employer Health Reimbursement Arrangement. QSEHRA allows eligible small employers to provide a fixed amount of money per month to offer as a tax-free reimbursement to eligible employees for health insurance premiums and medical expenses.
This new HRA became effective January 2017 after President Obama signed the 21st Centuries Act in December of 2016 before he left office. This act had a surprisingly strong bipartisan support and essentially offers some of the tax advantages large employers receive to eligible small employers. IRS Notice 2013-54 prohibited businesses from offering HRA’s to reimburse individual major medical insurance premiums. Now, a QSEHRA is the only solution that allows employers to offer their employees tax-free reimbursements for insurance premiums.
Who is eligible for a QSEHRA?
You can offer a QSEHRA to your employees if:
- You are a small employer with less than 50 employees and
- You do not offer a group health plan
How does a QSEHRA work?
As an employer, the QSEHRA provides you with flexibility. You control the benefit amounts offered to your employees and determine if you want to include medical expenses as eligible for reimbursement. Then, you control how the benefits of the QSEHRA are communicated to your employees. Be aware, there are communication and timing requirements set by the IRS.
Employers are allowed to offer different benefit amounts to employees based off of age or family size. Employers may also elect to offer the same benefit amount to all employees regardless of age or family size. If the benefit amounts differ from employee to employee, you will need to ensure that the “Same Terms Requirement” outlined in IRS Notice 2017-67 is met.
Maximum Benefit Amounts
There are also statutory limits on the maximum benefit amount employers are allowed to provide each year. For the 2018 year, the maximum benefit amounts are as follows:
Single: $5,050 per year
Family: $10,250 per year
These amounts are tied to inflation and are adjusted each year. You can expect to see the next calendar year’s limits posted by mid-October.
Employers have the ability to determine what they want to reimburse their employees for. Do you only want to allow insurance premiums? Great, the QSEHRA gives you the freedom to do so! Do you want to reimburse both insurance premiums and out-of-pocket medical expenses? With the QSEHRA, you can do that too! Employers have the power to customize their individual QSEHRA, including their effective date, all of which are outlined in their QSEHRA plan documents.
Once the plan documents have been created and the employer has selected an effective date, they are required to communicate their QSEHRA in a timely manner. This communication must be sent either 90 days before the start of the plan year or when employees are newly eligible. Employers may face penalties if the required information is not appropriately communicated to employees.
The communication to employees must include the following points:
- The amount of the benefit being provided.
- A statement that the employee is responsible for informing the health insurance marketplace of the QSEHRA benefit amount, in case there are any available tax credits.
- Employees must maintain health coverage that meets MEC requirements.
Want more Internal Revenue Code information around the communication requirements? Click Here.