On Tuesday, October 31, 2017, the Internal Revenue Service (IRS) released official guidance on the usage of Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) in Notice 2017-67, The guidance comes nearly a year after the passage of the 21st Century Cures Act, which was signed into law by President Obama in December 2016, and contains 79 questions and answers in a 59-page document.
Topics covered by the QSEHRA guidance are listed below. Among other topics, the IRS confirmed that in order to offer a QSEHRA, the employer must not offer any other group health plan, and that for the purposes of the accounts, ‘group health plan’ includes such coverage as dental and vision, in addition to major medical.
With a QSEHRA, certain small employers may offer a health reimbursement arrangement (HRA) to their employees which can be used for eligible medical expenses, including health insurance premiums. A QSEHRA is not a group health plan, and differs from a traditional HRA, for which health insurance premiums were not eligible expenses under the Affordable Care Act (ACA).
Like a traditional HRA, a QSEHRA is funded exclusively by the employer. For employees, a QSEHRA does not count toward their gross income as long as the minimum essential coverage requirement is met.
Topics covered by the QSEHRA guidance include:
- Eligible employer requirements, including size of workforce and group health plan exclusions
- Eligible employee requirements, including employees that can be excluded
- Same term requirements (the arrangement is generally offered on the same terms to all eligible employees by the eligible employer)
- Statutory dollar limits and how they operate
- Written notice requirements
- Minimum Essential Coverage (MEC) requirements (Proof of meeting requirement, consequence for not meeting requirement)
- Reimbursement requirements
- Substantiation requirements
- Reporting requirements
- Tax reporting requirements for payments and reimbursements from a QSEHRA
- Interaction between ACA premium tax credits and QSEHRAs
- Effective date of the guidance
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