What Is QSEHRA? 2025 Guide for Employers

Typically, health insurance plans available on the exchange meet the MEC requirements, too. To use a QSEHRA, a small business must offer minimum essential coverage to its employees as defined by the Affordable Care Act. If those two qualifications are met, then the employer can set up the QSEHRA. QSEHRAs are also portable, meaning employees can take their reimbursement funds with them if they leave the company.

To claim reimbursement, employees must provide detailed documentation, such as receipts or invoices, as evidence of their expenses. They then submit these documents to their employer or a designated third-party administrator, who reviews the claims to ensure they meet the established criteria. Proper documentation ensures a smooth reimbursement process and compliance with QSEHRA guidelines. To answer your question though, you should still submit it to your QSEHRA administrator. Although you can only receive the monthly maximum allowance set by the employer, your expense can “roll forward” and you can get reimbursed for it in future months.

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Employers should review their current offerings to confirm compliance with this requirement. A QSEHRA is a Health Reimbursement Arrangement (HRA) designed for small businesses that do not provide group health insurance. Employees can utilize the pretax funds alongside a Marketplace health plan or Medicare. Although that takes care of the month-to-month reimbursements, you’ll want to be aware of year-end requirements too.

Instructions for recording QSEHRA reimbursements on Quickbooks and Intuit Online Payroll:

You qualify for a Special Enrollment Period if you’ve had certain life events, including losing health coverage, moving, getting married, having a baby, or adopting a child. Small businesses can choose how much they want to reimburse, but each full-time employee must be eligible for the same reimbursement amount. For each subsequent reimbursement request, employees must prove MEC is still in place for the period during which the medical expense was incurred. Finally, businesses can also adjust the contribution amounts to QSEHRAs based on their budget and financial circumstances.

Contributions under QSEHRA benefit plans are tax-free for both employers and employees. In fact, employers are allowed to deduct the reimbursement amounts from their business taxes, while employees do not pay income or payroll taxes on their contributions. Additional tax benefits, such as the Indiana Small Business HRA Tax Credit, may also be available depending on your location.

Employer qualifications

Setting up a QSEHRA is easier than you think if you haven’t already. After an employee leaves or you gain a new one, you must end or extend your QSEHRA benefit appropriately. After all, those who look back rarely make the most of today’s opportunities. Optimizing human benefits now, especially HRAs will help you build stronger, long-lasting relationships with your clients and truly position yourself as an invaluable partner to their success. Moreover, if you don’t know an answer, you can always speak with your clients or point them toward licensed agents or advisors.

QSEHRA Plans For Small Businesses: Pros, Cons & Pricing

With deductibles, co-pays, and prescription drugs all hitting our wallets hard every month it’s easy to see why so many people are relying on their benefits to help with the costs. Small businesses are no different, which is why the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) was created. Employers or HR managers must also monitor ongoing compliance with plan rules and regulations as detailed record-keeping is essential for IRS reporting and audit purposes. Businesses are required to report QSEHRA contributions and reimbursements on employees’ W-2 forms at the end of the year. Plan administrators can ask for documentation to prove that plan members actually spent the money on eligible healthcare costs.

Other Coverage Types

Employers must provide employees with a written notice regarding their QSEHRA eligibility at least 90 days before the beginning of a new plan year. However, if an employee is not eligible at that time, a business is required to notify the employee when they first become eligible. In addition, employees must show proof of their health insurance and medical costs in order to be reimbursed. Next, it’s time to decide how much you’ll offer your employees to reimburse their out-of-pocket medical costs and health insurance premiums. You can customize monthly allowances based on employee age and family status. HRAs are funded by employers, while FSAs allow employees to contribute pre-tax funds.

• It allows employers to reimburse their staff for medical expenses, including health insurance premiums, on a tax-free basis.
• With QSEHRAs, employers also have control over how much they contribute to each employee’s healthcare expenses.
• See IRS Section 5000A(F)(4) and Section 911(d)(1) for more information and consult your tax advisor.

How to help employees combat high healthcare costs

Next, employers must draft a formal written plan document outlining the program’s terms, including eligibility requirements, reimbursement limits, and procedures. The plan must meet legal standards, including tax reporting obligations under IRC Section 6051 and ERISA disclosure requirements. Consulting legal or financial experts can help ensure regulatory compliance. Similar to Health Savings Accounts (HSAs), employees must provide documentation to substantiate their medical expenses to receive reimbursements from their employers.

The QSEHRA must be offered on the same terms to all eligible employees. While reimbursement amounts can vary based on family status or age, such variations must be applied uniformly. This ensures equitable access to health benefits and prevents discrimination. Discover how QSEHRA can streamline health benefits for small businesses, offering tax advantages and flexible employee reimbursements.

Proper Reporting for QSEHRA Benefits

• By taking this route, employees are more likely to find better, more cost-effective plan options for themselves and their families.
• Each month, we’ll deliver a reimbursement report so you know exactly how much to reimburse your employee.
• Your organization must review your employees’ submissions and either approve or decline the reimbursement request.
• In its W-2 instructions, the IRS added a new stipulation, specifically for employers with a QSEHRA.
• The limited contribution amounts may pose challenges for employers who wish to provide more generous healthcare benefits to their employees.

Understanding QSEHRA implementation is essential for maximizing its benefits. Unlike group health insurance plans where adp qsehra employers typically pay a portion of the premiums, QSEHRAs don’t involve any premium payments. Instead, employers reimburse employees for qualified medical expenses up to the specified annual allowance. This can lead to significant savings compared to the cost of providing group health insurance coverage.

PeopleKeep by Remodel Health’s QSEHRA administration software can save you valuable time while keeping you compliant. An administrative software solution, like PeopleKeep by Remodel Health, automates this for you and ensures your plan stays up to date with the latest regulations. Several aspects of the QSEHRA make it an attractive option to small business owners.

Offering a QSEHRA can make a small business more competitive by enhancing its benefits package, which is key to attracting and retaining high-quality talent. Employees have the freedom to select the healthcare options that best suit their needs, which can be appealing for those who value choice. Plus, knowing they have access to tax-free funds for healthcare expenses gives employees a sense of security and loyalty to their employer.

Please note that vitamins, supplements, and probiotics are not classified as over-the-counter drugs and will require a letter from a doctor stating the medical need for reimbursement. Although the individual MEC option won’t work with Cash Benefit Plans, the MEC may still be worth it so that your Medical Expenses and OTC Drugs are reimbursable if allowed by the QSERHA’s plan design. Let our team of experienced and licensed professionals help you evaluate your options. Limits in 2023 were $487.50 per month for employee-only contributions and $983.33 per month for contributions towards employees with families/dependents. This resource provides you with seven proven strategies to maximize your benefits. Here’s the best part—unlike working with a third-party QSEHRA administrator, our software simply acts as a support system for self-administrators, so you’re always the one calling the shots.

QSEHRA plan documents must include detailed information about the benefit you’re offering to comply with federal regulations. Your plan document package should explain your new plan and coverage details and instruct employees to inform their insurer of their QSEHRA allowance. Employees’ spouses and legal dependents can also use the employees’ allowance. Employers may also choose to include part-time workers, but they must offer them the same monthly allowance as full-time employees.