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Qualified Small Employer HRA (QSEHRA)

QSEHRAs can provide reimbursement for medical expenses incurred by employees during the QSEHRA coverage period. This includes reimbursement for individual major medical health insurance premiums and other expenses under Code §213(d). Furthermore, a QSEHRA can cover premium payments for a spouse or other eligible family member, including post-tax paid through another employer's plan.

Which employers are eligible for QSEHRAs?

Available to businesses with fewer than 50 full-time employees that does not offer a traditional group health plan. An employer that provides a group health plan to current employees in an excludable category is not an eligible employer.

Which categories of employees are not eligible?

Excludable Categories:

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• Employees who have not completed 90 days of service

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• Employees who have not attained age 25 before the beginning of the plan year

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• Part-time employees

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• Seasonal employees


• Non-participating employees covered by a collective bargaining agreement (if health benefits were the
subject of good faith bargaining)


• Non-resident aliens who do not receive earned income from the employer from sources within the United States.
 

An employee must be offered the QSEHRA no later than the day after the date on which the employee ceases to fall within any of the excludable categories.

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"Discover the Tax Savings You Can Get with a QSEHRA"

QSEHRA reimbursements are exempt from payroll and income tax. However, only employees who have minimum essential coverage (MEC) eligible for tax-free reimbursements. Employees without MEC must declare all QSEHRA reimbursements as taxable income when filing their taxes.

  • Businesses cannot offer group health, dental, or vision insurance in addition to a QSEHRA.

  • QSEHRAs are not HSA compatible.

  • Employees that cease to be eligible would forfeit the remaining balance. COBRA does not apply.

  • Employees cannot opt out of the QSEHRA. 

  • Employees with premium tax credits can participate in the QSEHRA, but their premium tax credit will be reduced by the amount of their QSEHRA allowance. 

Do QSEHRAs have notice requirements?

To comply with regulations, employers are required to provide written notice to eligible employees at least 90 days prior to the of each plan year. If an employee becomes eligible for the QSEHRA after the plan year has begun, such as those hired midyear, the notice must be sent on or before the first day of eligibility. The notice can be sent in writing or electronically, following the IRS guidelines for electronic media usage.

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