QSEHRA: NOT A WORD … AN ACRONYM

QSEHRA: NOT A WORD … AN ACRONYM
Health Benefit Option for Employers with 50 or Fewer Employees

If you are an employer with 50 or fewer employees and have not heard of or participated in QSEHRA, this article is for you. First let’s flesh out the acronym QSEHRA … Qualified Small Employer Health Reimbursement Arrangements.

In straightforward terms, these plans allow small employers to reimburse employees to help pay for medical expenses … including individual insurance premiums. Reimbursed expenses are tax deductible to the employer and received tax-free by employees.

Note: QSEHRA is welcome news for employers that offered Health Reimbursement Arrangements (HRAs) prior to health care reform legislation which significantly restricted the use of such plans with heavy penalties imposed for violations. QSEHRAs are an exception to the Patient Protection and Affordable Care Act (PPACA) of 2010 HRA requirements.

Since the QSEHRA benefit was passed in December 2016 as part of the 21^st Century Cures Act, literally thousands of businesses now offer these plans across the country. Notably, a majority of companies that chose this route did so to offer employee health benefits for the first time.

Reception by participating employees has been noteworthy with employees using nearly 80 percent of the tax-free money available to them through plans in 2017.

Small business decision-makers are particularly attracted to QSEHRA. The average employee count by companies adopting a plan in 2017 was six. That would indicate that many, if not most of these companies are least likely to afford traditional group health benefits. QSEHRA offers an appealing and affordable option.

As you likely suspect, there are requirements and limitations that apply to both employers and employees under the QSEHRA regulations. Here’s a brief rundown.

Employers

• With 50 or fewer employees qualify if not considered an Applicable Larger Employer (ALE) under the PPACA.
• The employer does not offer a group health plan.
• Reimbursements in 2018 are limited to $5,050 for single coverage and $10,250 for family coverage.
• The plan must be offered to all employees under the same terms with few exceptions.
• Notifications to employees of their participation requirements.

Employees

• Must demonstrate they have minimum essential coverage through another source as required by the PPACA.
• Reduce their premium tax credit by the monthly reimbursement received from their company if the allowance doesn’t comply with the PPACA definition of “affordable coverage.”

Summary

QSEHRAs provide a valuable benefit to employers in attracting and retaining quality talent. Additionally, employees may enjoy tax-free dollars as reimbursement for medical expenses for themselves and their families. That said there are requirements that must be maintained by employers adopting these plans, with significant negative tax consequences for non-compliance. Business owners be sure to seek assistance from a tax professional.

This article is meant as a summary of the QSEHRA provisions. There is more to the story, especially as it may apply to your specific circumstances.

As ever, Pearson & Co stands ready to help you determine the applicability of QSEHRA for your company. A call or an email will be met with a rapid response!