An employer with fewer than 50 full-time/full-time equivalent employees may offer a qualified small employer health reimbursement arrangement (QSEHRA). See our previous article HERE. A QSEHRA was introduced by the 21st Century Cures Act in December 2016 and provides small employers new options for helping employees with medical expenses.
A QSEHRA is an arrangement by which payments or reimbursements for medical care expenses (including premiums for individual health insurance coverage) for eligible individuals and their family members may be reimbursed tax-free. A QSEHRA must meet the following requirements:
- Be funded solely by an eligible employer, with no salary reduction contributions;
- Expenses must be incurred by the employee or the employee’s family members and may be reimbursed after proof of coverage is provided;
- The amount of annual payments and reimbursements may not exceed $4,950 (individual) and $10,000 (family);
- The arrangement is provided on the same terms to all eligible employees.
The QSEHRA rules require an eligible employer to furnish a written notice to its employees. The law imposes a penalty for failing to provide eligible employees with the required QSEHRA notice in a timely manner. An employer providing a QSEHRA to its eligible employees for a year beginning in 2017 does not have to provide the initial written notice to those employees until further guidance is issued. No penalties will be issued for failing to provide the QSEHRA notice.
Employers may wish to review their benefit offering and determine if offering a QSEHRA is a choice for them.