Overview of the QSEHRA
The QSEHRA (Qualified Small Employer Health Reimbursement Arrangement) is an account that you, as the employer of 50 or fewer employees, can fund so that your employees can be reimbursed for health insurance premiums that they purchase for themselves and/or their family members depending on how you wish to design this program (premiums for vision and dental do not qualify for reimbursement). The most important thing to keep in mind in deciding whether to implement a QSEHRA is that in order to qualify, your company cannot offer any group health plans to your employees (this includes vision and dental plans).
The amount in a QSEHRA can never exceed the annual statutory limit, however, the actual amount that you make available in this account can be less than the statutory limit. The annual benefit accrues on a monthly basis and may be used to reimburse your employees for their health insurance premiums, you also have the option to design the plan so that it can reimburse other out-of-pocket qualifying medical expenses per the IRS Code Section 213(d). In order to qualify for the reimbursement of medical expenses other than your health insurance premiums, your employees must show that they have health insurance coverage that meets the minimum essential coverage requirement for each month of the plan year.
Moving Forward with a QSEHRA
Once you have decided that a QSEHRA is a good option for your company, you will need to make decisions on the design of your company’s QSEHRA:
- Will the plan cover solely the premiums of your employees or, do you want to design it to cover reimbursement of family coverage?
- Do you want to reimburse employees up to the maximum statutory limits, or a lesser amount?
- Do you want to allow the plan to reimburse employees for other qualifying medical expenses in addition to health insurance premiums?
- Do you wish to allow unused funds to be carried over to future plan years (keep in mind that if you are making the annual statutory limit available to your employees, they will never be able to carry over an amount that would cause them to have more than this limit)?
- Which employees will be eligible for the Plan?
Eligible employees, for purposes of the QSEHRA, are all employees of the eligible employer, except that an employer may exclude:
- employees who have not completed 90 days of service,
- employees who have not attained age 25,
- part-time or seasonal employees,
- employees not included in the plan who are covered under acollective bargaining agreement (as long as accident and health benefits were the subject of good faith bargaining), and
- employees who are nonresident aliens and who receive no U.S. earned income.