QSEHRA Frequently Asked Questions

QSEHRA FAQs

In December 2016, President Obama signed the 21st Century Cures Act into law. The Cures Act allows small employers to offer Health Reimbursement Arrangements (HRAs) to their workforce to help cover the cost of medical expenses and health insurance premiums for themselves and their families. Previously, the Affordable Care Act (ACA) prohibited businesses from offering HRAs for individual insurance premiums.

Here are some FAQs to help you understand this program:

QSEHRA FAQs:

Which employers can offer QSEHRAs?

Certain small employers, generally those with fewer than 50 full-time equivalent (FTE) employees AND who do not offer a group health plan to any of their employees, can offer QSEHRAs to their staff, provided the arrangement be offered on the same terms to all full-time employees.

Can employers who have a group insurance plan also offer a QSEHRA?

No. The Cures Act does not apply to small employers who offer a group health plan.

What benefits does a QSEHRA cover?

As defined in Section 213(d) of the Internal Revenue Code, a QSEHRA can provide for the payment or reimbursement of expenses for medical care. In addition, employees can use their QSEHRA to help pay for individual health insurance premiums. One thing to keep in mind is that all covered costs, including medical expenses and insurance premiums, must be documented.

Who can contribute to the QSEHRA?

Like a regular HRA, a QSEHRA is funded solely (100%) by the employer. Therefore, employees cannot contribute and the employer’s contributions are not deducted from the employees’ pay.

Are there contribution limits?

Yes. For single employees, the employer may contribute a maximum of $5,450 annually. For employees with family expenses, the employer may contribute a maximum of $11,500 annually. Check here for current contribution limits.

What are the health plan requirements for employees?

Employees must purchase a health plan that has minimum essential coverage (MEC), as stated by the ACA.

If an individual purchases health coverage without MEC, then they may be taxed and reimbursements from the QSEHRA may be included in their gross income.

Which employees are eligible for a QSEHRA?

Full-time employees who work 130 hours per month, or 30 or more hours per week for 120 consecutive days. Generally, all employees must be offered coverage under the same terms with some exceptions.

Can employees be excluded?

Yes, some employees may be excluded. Employers may exclude the following from receiving a QSEHRA:

  • Seasonal employees
  • Part-time employees
  • Workers who are covered by a collective bargaining agreement in which accident and health benefits were the subject of good faith negotiations
  • Employees with less than 90 service days
  • Employees who are under age 25
  • Nonresident aliens with no earned income from sources within the United States

Are individuals who purchase subsidized health insurance affected by QSEHRA?

Yes. For employees who obtain health insurance through a public exchange and qualify for subsidized coverage, they must report the amount in the QSEHRA to the exchange. Their federal subsidy amount may be reduced by the amount in the HRA benefit. This is not an easy answer as there are a lot of components to look at. The IRS has more information available about this program.

Is a QSEHRA subject to COBRA or ERISA rules?

No. Since a QSEHRA is not a group insurance coverage, employers are not required to offer COBRA coverage or ERISA.

When are QSEHRAs applicable?

Employers may start offering QSEHRAs on or after January 1, 2017. Employers must notify their workforce as soon as they are eligible to participate and/or 90 before the start of the plan year.

Are there administrative requirements for QSEHRA?

Yes. Employers must provide a written notice to their workforce 90 days before the start of the plan year with the following information:

  • Amount in the QSEHRA benefit
  • Informing employees to notify the exchange of the QSEHRA if they apply for a subsidy
  • Consequences of not getting MEC, which may result in taxes and the inclusion of reimbursements in their gross income

Employers must also include the amount of available QSEHRA benefits on their employees’ W-2s at the end of the year.

In order to get reimbursed for medical or insurance expenses, employees must provide ‘proof of coverage’ to their employer.

*The QSEHRA FAQs and answers are not intended to act as legal advice. Please contact your benefits administrator or legal representative for more information. 

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