A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) allows small employers to contribute to their employees’ health care expenses by providing non-taxed reimbursements to employees who maintain minimum essential coverage.

Generally the QSEHRA is utilized by smaller employers with less than 50 employees, who are not looking to offer a full benefits package. 

Employers are able to choose how much to contribute to their employees QSEHRA up to the maximum amount. 

• For single employees the 2021 maximum contribution is $5,300. 
• For employees and their household the 2021 maximum is $10,700.

When employees pay for a reimbursable expense or go to the doctor, they will pay their health care provider or insurance company directly for their health care costs. After that, they’ll submit a receipt, or proof of payment, and receive tax-free reimbursement by the QSEHRA.

Small businesses must meet specific guidelines in order to qualify for a QSEHRA.

• The arrangement must be on the same terms for all full-time employees (reimbursement amounts may only vary based on age and the number of individuals covered) 
• They must have less than 50 full-time employees.
• They will not qualify if they already offer a group health plan or a Flexible Spending Account (FSA). 

It is a tax free way to offer benefits without the hassle of a traditional package. 

• Employers will have greater flexibility in choosing an insurance plan.
• It offers more flexibility for employers to choose how much to contribute as well.
• Instead of paying up front for premiums, you only pay the expenses that your employees submit. If that amount is under the contribution amount then the employer can simply hold onto that money.
• They will also have the flexibility to choose which expenses they wish to contribute to. 

The first step is to decide the layout of the plan. 

• How much do you plan to reimburse per employee?
• Which expenses do you plan on reimbursing?

Instead of waiting until the Open Enrollment period, if employees are eligible and wish to participate in a QSEHRA, they may join at any time within 60 days of being offered the plan. Though, employers may wish to time it in accordance with standard enrollment dates.

The next step includes working with a partner to draft plan documents that are required for maintaining compliance. 

And finally, employers need to send a written notice to employees as soon as they’re eligible and 90 days before the beginning of each plan year. The written notice must include certain information, which can be found on the IRS website here.

Related Terms: Benefits Provider