QSEHRA for a Nanny

QSEHRA stands for Qualified Small Employer Health Reimbursement Arrangement. Employers with less than 50 employees (qualified small employers or QSEs) can offer Health Reimbursement Arrangements (HRA) to their employees. While you are not allowed to offer a QSEHRA and a group insurance plan, QSEHRAs can:

reimburse your nanny for health insurance coverage purchased on the individual market or through the health care exchange
be paired with an employee spouse’s plan
be used for out-of-pocket medical, dental, and vision expenses.

QSEHRAs are funded by the employer up to $5,850 for a nanny who is single and $11,800 per employee with a family (2023 contribution rates).

Advantages of a QSEHRA for a Nanny

Employer contributions to a nanny’s account are not taxed for you or your employee. Reimbursements are also not taxed as long as your nanny has a health plan that meets minimum essential coverage (MEC).
Reimbursements may be made immediately when your nanny becomes eligible to participate.
Nannies can purchase the health plan they want
Employers can set the budget and include waiting periods
Funds can carry over from year to year if allowed by the employer. An employee’s total benefit can’t exceed the annual contribution limit.

Employee Requirements

Nannies must purchase a health plan that has minimum essential coverage (MEC), as stated by the Affordable Care Act (ACA). If your nanny purchases health coverage that doesn’t qualify as MEC, they may be taxed and reimbursements from the QSEHRA may be included in their gross income.

Qualified health plans include: Marketplace plans, Medicare, Medicaid, CHIP, individual health plans with MEC (ask the insurance company if this plan matches a “qualified health plan”), retiree plans, and COBRA.

Unqualified health plans include: Coverage for vision care only, coverage for dental care only, workers’ compensation, coverage only for a specific disease or condition, and plans that only discount medical services.

For nannies who obtain health insurance through a public exchange and qualify for subsidized coverage (tax benefit towards the plan), they must report the amount in the QSEHRA to the exchange. Their federal subsidy amount will be reduced by the amount of their benefit.

Employer Requirements

Your employer responsibilities include:

Having a Plan Document
Distributing a Summary Plan Description (SPD) within 90 days of your employee becoming a plan participant
Not sponsoring any other health, dental or vision plan
Providing a QSEHRA to all eligible employees (if you have more than one employee) under the same terms and employees can’t waive participation in the QSEHRA
Providing all eligible employees with a written notice 90 days prior to the start of the plan year
Obtaining proof that employees have minimum essential coverage with each reimbursement and on an annual basis
Substantiating all reimbursement claims
Reporting the employee’s permitted benefits in box 12 of their Form W-2 using code FF

Health Insurance & Benefits Options Comparison Chart

This chart will help you compare the various plans and select one that will best meet the needs of your nanny. These are contribution rates for 2023.

	FSA	HRA	HSA	QSEHRA	ICHRA	POP
Employer funded
Employer tax savings
Employee funded
Employee tax savings
Covers out-of-pocket expenses
Covers insurance premiums
Used to purchase health insurance
Contribution limits	$3,050	No limit	$3,850 single $7,750 family	$5,850 single $11,800 family	No limit	No limit
Pairings	N/A	Group plan	High-deductible plan	Individual plans	N/A	Group plan
Coverage restrictions	None	Must cover at least two employees	None	None	None	None

Get Started

Setting up a QSEHRA for your nanny with GTM Payroll Services is easy and straightforward. Our insurance team will guide you through the entire process. Call (800) 929-9213 for more information or to get started.

Looking for some other health benefit ideas? Check out these options.