What is a QSE-HRA and is it Good for Small Businesses?

Many small business owners want affordable ways to help their employees with medical expenses, but offering a full health plan is a complex task and can be expensive. A Qualified Small Employer Health Reimbursement Arrangement (QSE-HRA) might be a good solution.

The QSE-HRA plan allows for use of tax- free dollars to reimburse employees for individual health insurance plans purchased on the individual market or the ACA exchange. It also allows for out-of-pocket medical, dental, and vision benefits.

The IRS has announced that the contribution limit for QSE-HRAs will be $5,150 per employee and $10,450 per family in 2019. (For 2018, the contribution limit is $5,050 per employee and $10,250 per family.)

Here are the rules for the QSE-HRA plan:

• Employee contributions are not all allowed, all contributions must come from the employer.
• Employers are not required to offer coverage to employees in order to offer an HRA.
• Unused funds from one year can be rolled to a new plan year, if the employer chooses to do so.
• All employees are eligible except those requesting family coverage, those under 25 years of age, part-time or seasonal employees, and employees with less than 90 days of employment, and other factors having to do with union contracts or citizenship.
• Health insurance premiums and other qualifying medical expenses can be paid with this plan.
• For health plans purchased on the ACA Marketplace, reimbursements can be furnished under this plan, but employer-sponsored QSE-HRA payments must be offset against any payment credit received in the Marketplace.
• Before issuing reimbursement from a QSE-HRA, employee health plans must be verified by the employer.
• Written notice must be provided to qualifying employees 90 days prior to the start of each plan year, and must state that the employee needs to inform the ACA of the plan amount when purchasing health insurance. Health insurance coverage must be maintained throughout the plan year, otherwise the standard ACA penalty will apply and will cause all reimbursements from the plan to be taxable income. The benefit must be reported on employees’ W-2s.

Speak to your broker about offering a QSE-HRA plan, or contact us at (518) 373-4111 for more information.