Whether you’re new to QSEHRA or have been participating for some time, there are some things you should know. This article will give you the information you need to understand the program and what to expect.
Reimbursement of QSEHRA Expenses
Whether you’re a small business owner or an employee, the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is a tax-advantaged way to pay for medical expenses. However, this tax benefit is only available to qualified employees and certain business owners.
Here’s a QSEHRA guide to know if you’re eligible for QSEHRA. First, your business must have fewer than 50 full-time employees, and you must offer the plan on the same terms to all employees. The Internal Revenue Service (IRS) sets annual limits on reimbursements. They are adjusted for inflation each year.
The amount you can reimburse your employees will depend on the cost of health insurance in the individual market. In 2019, you can reimburse up to $11,050. If you have fewer than 50 employees, you can reimburse your employees up to $5,450. This amount is prorated for employees who participate in the plan for fewer than 12 months.
You can reimburse your employees for qualified medical expenses, including deductibles, copayments, and prescriptions. Your employees must submit proof of their expenses to your HRA administrator. You can reimburse your employees up to 200 expenses per year. The reimbursements are paid pre-tax into your employee paychecks.
You can offer QSEHRA to part-time and seasonal employees. You can offer the plan to your spouse, provided they are your employee. You must provide written notice to employees who are not eligible to participate in the plan. You could face monetary penalties if you fail to provide written notice.
Limits Set By the Internal Revenue Service
Small businesses can reimburse eligible employees for qualified medical expenses using the QSEHRA (Qualified Small Employer Health Reimbursement Arrangement). The amount of money the employer is willing to contribute to the QSEHRA is up to the employer, but the Internal Revenue Service (IRS) will limit the QSEHRA budget each year.
QSEHRA reimbursements are tax-free if the employee is covered by a qualified health insurance policy or is otherwise enrolled in minimum essential coverage. However, reimbursements are subject to tax if the employee is not covered under minimum essential coverage (MEC). If the employee is not covered, the employee may be subject to a penalty for not having MEC. If the employee does not have MEC coverage, subsequent reimbursement requests must include proof of MEC coverage.
Design Your Plan to Fit Your Business Needs
Creating and managing a QSEHRA can be a daunting task for the uninitiated. Thankfully, some organizations can make the process much easier. These include FLYTE HCM, which specializes in QSEHRA administration. They can provide an overview of the QSEHRA and answer any questions.
A QSEHRA is a relatively new form of health reimbursement arrangement. It allows employees to claim reimbursements for qualifying medical expenses. The money goes directly toward their healthcare needs. This makes it a better fit for employees than a group health plan and results in more optimization.
The QSEHRA is best used by employers with fewer than 50 full-time equivalent employees. There are other less costly options for smaller businesses. You can also opt to outsource the QSEHRA administration to a third party. In addition to cost savings, having a third-party administrator can ensure you comply with all legal and regulatory requirements. Moreover, there is no “use or lose” with the QSEHRA. This allows you to maximize your tax savings.
The QSEHRA is a clever way to get your employees to pay their medical bills upfront rather than having them pay the bills later. The QSEHRA also provides the gimmick of allowing employees to select a health plan independently. This gives them more freedom to choose a plan that meets their needs.
Qualifying to Participate in a QSEHRA
Whether you are starting a business or looking to expand, qualifying to participate in a QSEHRA can help you cover medical expenses. QSEHRA is a flexible spending account that sets aside a certain monthly amount for qualified expenses. The amount is tax-free to employees. However, you must follow the rules of the QSEHRA. Those rules will determine how you can best reimburse employees.
Those eligible for QSEHRA are full-time employees with minimum essential health coverage (MEC). This means that your employees must have an insurance plan that meets the requirements of the QSEHRA. These plans include most major medical plans and Medicaid.
QSEHRA can only reimburse employees who have had MEC for the last 90 days. Employers who offer QSEHRA must provide written notice to all eligible employees. They are subject to a $50 per employee penalty if they fail.
QSEHRA reimbursements can be reimbursed through payroll, cash, or bank transfer. The funds can be used for medical expenses and insurance premiums. However, they cannot be used to pay for the costs of a group health plan.