How QSEHRAs Make Healthcare Reimbursement Easier on Small Businesses
A change to the Affordable Care Act implemented at the start of 2017 has made healthcare reimbursement a little easier and more affordable for small businesses. With Qualified Small Employers Health Reimbursement Arrangements, small businesses can more easily provide health insurance stipends to their eligible employees on a pre-tax basis.
QSEHRAs provide numerous benefits to small employers that, in the past, could not afford to offer group health plans that meet ACA standards. If you own or manage a small business and would like to help offset your employees’ healthcare expenses and offer a more competitive benefits package, a QSEHRA may give you a feasible option.
What are QSEHRAs?
In short, a QSEHRA plan allows eligible small businesses to reimburse employees to assist them with health insurance expenses before taxes. Before now, the ACA prohibited small employers from providing health insurance stipends unless they were taxed. Many employers encountered problems with this arrangement, removing their benefits packages entirely or paying more to offer group health plans.
QSEHRAs were implemented with the passage of the 21st Century Cures Act, which became effective January 1, 2017. The law gives certain small employers the ability to provide pre-tax stipends specifically for health insurance. It is now more effective for employers to reimburse their full-time employees for the cost of their individual insurance plans, without that money becoming subject to income or employment taxes.
The federal government monitors QSEHRAs closely monitored, however, and employers must adhere to some strict regulations if they wish to offer this benefit. There are specific regulations on who is eligible to offer and receive stipends from QSEHRAs, how much employers can contribute and how to properly implement the program into a business.
Employers eligible to provide QSEHRAs must have 50 or fewer full-time employees and cannot offer a separate group health plan to employees. Eligible employees must be full time and provide proof of health insurance coverage.
Each employer must determine its contribution amount and then offer the same terms to each employee regardless of job level or seniority. The maximum yearly amount an employer can provide to an individual is $4,950, and the maximum allowed for an employee and his or her family is $10,000.
The rules and regulations associated with QSEHRAs can be complex, and so it’s advisable to consult a payroll and tax professional to make sure you’re meeting all necessary requirements for your business or organization.
Benefits of using QSEHRAs
Many small employers find QSEHRAs helpful because of the numerous benefits they deliver to their business and employees.
A QSEHRA plan is much more affordable—and often more sensible—than offering a group healthcare plan. The ability to control the contribution amount across all employees gives small business owners more control over their budgets. And, offering pre-tax stipends enables employers to give more directly to their employees.
Offering healthcare benefits can also help make small business employment opportunities more valuable to applicants and attract more highly qualified job candidates. Employee satisfaction is typically higher at organizations that offer benefits packages or reimbursements for healthcare.
If you own a small business and are interested in offering healthcare benefits to your employees, QSEHRA may be a good option for you. Connect with our partner, Flex Plan Administrators, to learn more about your options.