Small employers (under 50 full-time equivalent employees as defined by ACA) can now contribute money into standalone Health Reimbursement Arrangement (HRA) accounts. These specialized HRA accounts are called Qualified Small Employer HRAs (QSEHRA).
To qualify for a QSEHRA, employers must have less than 50 employees and cannot offer a group health plan.
Like a traditional HRA, these plans are customizable – meaning employers can choose which medical services their employees can use the money towards (such as co-payments, deductibles, and individual insurance premiums). Employers do not pay taxes on their contributions, and employees do not pay taxes on the money they use.
The maximum amount an employer can contribute annually is $4,950 for individuals and $10,000 for families. This amount may be adjusted annually by the IRS for inflation.
Employers who choose to offer the QSEHRA must offer it to full-time employees. The wait period cannot exceed 90 days. Employees who may be excluded from the program must meet at least one of the following criteria: under 25 years of age, seasonal or part-time employees, or covered by a collective bargaining agreement for accident and health benefits.
The QSEHRA is an opportunity for small employers to offer their employees a cost-effective and hassle-free benefits program: the plans are not subject to COBRA and do not require ACA reporting.