#qsehra

QSEHRA

Understanding ICHRA vs QSEHRA: Innovative Approaches to Employee Health Benefits

In the ever-evolving landscape of employee health benefits, employers are constantly seeking innovative solutions to provide comprehensive and affordable coverage while aligning with their financial goals.

Small businesses often face unique challenges when it comes to providing competitive employee benefits. However, the Qualified Small Employer HRA Plan Document is a game-changer. Let's explore the importance of the QSEHRA plan document and how it empowers small employers and their employees.

Why is the QSEHRA Plan Document Significant for Small Employers?

Affordable Healthcare Options: Small employers can't always provide comprehensive group health insurance. The QSEHRA, coupled with the plan document, allows them to contribute towards employees' healthcare costs without the burden of high premiums.

Flexibility and Customization: The plan document provides employers with flexibility in terms of contribution amounts, making it easy to adapt benefits to the business's financial situation. Employees can choose the coverage that suits them, giving them a more personalized healthcare experience.

Tax Advantages: Contributions made by small employers through the QSEHRA are tax-deductible, making it a cost-effective way to offer benefits while saving on taxes. Employees also receive reimbursements tax-free.

Recruitment and Retention: A well-implemented QSEHRA can enhance small employers' competitiveness in recruiting and retaining top talent. It demonstrates a commitment to employee welfare and helps attract individuals seeking personalized benefits.

The Role of the QSEHRA Plan Document

The QSEHRA Plan Document is vital for ensuring compliance with legal requirements. It defines the eligibility criteria, contribution limits, and reimbursement guidelines. It must also outline the process for submitting and reimbursing eligible expenses and be in accordance with IRS guidelines.

Customization and Professional Guidance

Employers can customize the QSEHRA Plan Document to fit the specific needs of their workforce. However, it's crucial to work with legal and benefits professionals to ensure the plan document adheres to legal standards and effectively meets the needs of both the employer and employees.

Introduction

As the business landscape evolves, small employers face the challenge of attracting and retaining talent while managing costs. One innovative solution that can help meet both these objectives is the Qualified Small Employer HRA Plan Document (QSEHRA). In this blog post, we'll explore the QSEHRA plan document, shedding light on its significance, how it works, and the benefits it offers to both employers and employees.

What Is a Qualified Small Employer HRA (QSEHRA)?

The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is a tax-advantaged benefit that allows small employers to provide their employees with funds to cover qualified medical expenses and health insurance premiums. To offer a QSEHRA, employers must meet specific criteria, including having fewer than 50 full-time employees and not offering group health insurance coverage to their employees.

Understanding the QSEHRA Plan Document

A crucial component of implementing a QSEHRA is the QSEHRA plan document. This is a written document that outlines the details and rules of the QSEHRA plan, ensuring compliance with IRS regulations. Here's what you need to know about the QSEHRA plan document:

1. Plan Description:

The plan document should provide a clear and concise description of the QSEHRA, including its purpose, eligibility criteria, and benefits offered to employees. It should also specify how the plan operates and the roles of the employer and plan administrator.

2. Eligibility and Participation:

Define who is eligible to participate in the QSEHRA and how eligibility is determined. Outline any waiting periods, if applicable, and describe the process for employees to enroll or opt out of the plan.

3. Contributions:

Detail the maximum annual contribution limits for employees and how contributions are calculated. Explain any variations based on employee status or family size.

4. Reimbursement Procedures:

QSEHRA or the Qualified Small Employer Health Reimbursement Arrangement came into effect on January 1, 2017. Also known as Small Business HRA, it is a health coverage plan for companies that have less than 50 full-time-equivalent (FTE) employees and do not offer any group health policy to its employees.

Features of QSEHRA

Businesses can offer up to $854.16/month for employees with family and $420.83/month for single employees

Employees can make purchases according to their needs. The expenses that qualify include individual health insurance premiums, prescription & non-prescription drugs, deductibles, copays etc.

Employer contributions to each employee’s account must be equal

Plan premiums vary and are dependent on the employee’s age and number of family members included in the coverage

If a company is offering QSEHRA, it must cover all employees. (if any employee has opted for any other group health insurance plan, the employer cannot offer a QSEHRA plan). However, exceptions can be made when an employee is:

Less than 25 years old

A Union employee

Has less than 90 days of service with the company

A part-time or seasonal employee

A non-resident alien

Notice about QSEHRA needs to be sent by the employer to all its employees at least 90 days before the start of the calendar year in which they want to offer QSEHRA

Employees who are enrolled in health care share ministry are eligible for QSEHRA, although their reimbursements are taxable

Employees covered under spouse’s group policy are eligible for QSEHRA (medical expenses, copays and deductibles)

How does QSEHRA work?

First, companies offer a monthly allowance to all its employees. Then, employees make health-related expenditures including insurance policies etc. Proof of the expense incurred is submitted and the employer reimburses the amount up to their allowance limit.

Advantages of QSEHRA

It is a tax-free health benefit plan:

QSEHRA can be used with an HSA (Health Savings Account), given that the HSA is adjusted

Small businesses can set their own budget

Employers do not have to deal with insurance companies and their problems

Free of payroll tax for the business and its employees

Free of income tax for the employees (if they are covered by MEC)

The Harrison Group, a third-party administrator group offering unprecedented customer services and comprising highly-qualified benefit experts, can help you with this painless and simple plan. Contact us today!

About The Harrison Group, Inc.

Until very recently, employers were at risk of receiving steep fines if they reimbursed employees for non-employer sponsored medical care – the Affordable Care Act (ACA) included fines of up to $36,500 a year per employee for such an action. Late in 2016, however, President Obama signed the 21st Century Cures Act and established Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). As of January 1, 2017, small employers can offer these tax-free medical care reimbursements to eligible employees.

How Do QSEHRAs Work?

If an employee incurs a medical care expense, such as health insurance premiums or eligible medical expenses under IRC Section 213(d), the employer can reimburse the employee up to $4,950 for single coverage or $10,000 for family coverage. Employees may not make any contributions or salary deferrals to QSEHRAs.

The maximum amount must be prorated for those not eligible for an entire year. For example, an employer offering the maximum reimbursement amount should only reimburse up to $2,475 to an employee who has been working for the company for six months. For a complete list of medical expenses covered under IRC 213(d), see https://www.irs.gov/pub/irs-pdf/p502.pdf. Employers may tailor which expenses they will reimburse to a certain extent, and do not have to reimburse employees for all eligible medical expenses.

Much like other healthcare reimbursement arrangements, employees may have to provide substantiation before reimbursement. The IRS has discretion to establish requirements regarding this process, but has not yet done so. Although reimbursements may be provided tax-free, they must be reported on the employee’s W-2 in Box 12 using the code “FF.”

Which Employers Can Offer QSEHRAs?

To offer QSEHRAs, an employer cannot be an applicable large employer (ALE) under the ACA. Only employers with fewer than 50 full-time equivalent employees can offer this benefit. Further, a group cannot offer group health plans to any employees to qualify.