QSEHRA Plans

Introduction to QSEHRA

A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) allows small businesses with fewer than 50 employees to reimburse employees for medical expenses, including individual health insurance premiums purchased through the Affordable Care Act (ACA) marketplace. This flexible and tax-advantaged option is designed to help small businesses provide health benefits without offering a traditional group health insurance plan.

Key Features of QSEHRA

1. Eligibility:
   • Employers: Small businesses with fewer than 50 full-time equivalent employees that do not offer a group health plan.
   • Employees: All full-time employees are generally eligible. Part-time employees, seasonal workers, and those under a collective bargaining agreement can be excluded.
2. Reimbursements:
   • Taxability: QSEHRA reimbursements are tax-free for employees if they have minimum essential coverage. For employers, these reimbursements are tax-deductible.
   • Eligible Expenses: Reimbursements can be used for individual health insurance premiums, out-of-pocket medical expenses, dental, vision, and other IRS-approved healthcare costs.
   • Medicare Premiums: By the way, QSEHRA can also reimburse Medicare premiums and other qualified medical expenses for eligible employees.
3. Contribution Limits:
   • The IRS sets annual contribution limits for QSEHRA. For example, in 2024, the limits are $5,850 for individual coverage and $11,800 for family coverage. These limits are adjusted annually for inflation.
4. Administration:
   • Employers must provide a written notice to employees detailing the amount available for reimbursement and the need for minimum essential coverage to avoid taxation.
   • Claims for reimbursements must be substantiated with proper documentation of expenses.

Advantages of QSEHRA

• Cost Control: Employers can set a budget for health benefits without the unpredictability of annual premium increases associated with group health plans.
• Flexibility: Employees can choose health plans that best suit their needs, using QSEHRA funds for premiums and other medical expenses.
• Tax Benefits: Both employers and employees can benefit from the tax advantages of QSEHRA reimbursements.

Frequently Asked Questions

• Are QSEHRA reimbursements taxable?
  No, QSEHRA reimbursements are not taxable for employees with minimum essential coverage. Employers can deduct these reimbursements as business expenses.
• Can QSEHRA reimburse individual health insurance premiums?
  Yes, QSEHRA can be used to reimburse individual health insurance premiums, including those purchased through the ACA marketplace.
• What can QSEHRA funds be used for?
  QSEHRA funds can be used for individual health insurance premiums, out-of-pocket medical expenses, dental and vision care, and other IRS-approved healthcare expenses.