Remember, the tax-free nature of the QSEHRA as a small business health insurance option comes from having your plan documents in place, staying compliant, and having the proper year-end reports. With our QSEHRA platform at Take Command, we’ll take care of that part for you. Each month, we’ll deliver a reimbursement report so you know exactly how much to reimburse your employee. When it comes to benefits, both employers and employees are always looking for the best deal.

Small businesses are considered the “United States’ economic engine.” They drive job growth and innovation. Their success is vital to all of us, so it’s important to understand the unique challenges that small businesses face. Limits in 2023 were $487.50 per month for employee-only contributions and $983.33 per month for contributions towards employees with families/dependents. Our partners cannot pay us to guarantee favorable reviews of their products or services. As the industry’s leading QSEHRA administrators, are here to help you through this process!

There are new, innovative offerings available to help businesses support their employees and their needs – without breaking the company bank. QSEHRA is a specialized plan for small businesses that are unable to offer their employees a traditional group health plan. It allows employees who maintain minimal essential coverage to pay for selected medical expenses, including their insurance premium. If your employees find themselves without healthcare coverage when they need it most, it can be a catastrophe.

Are QSEHRA reimbursements taxable?

Employees who don’t become eligible for the QSEHRA until mid-year will receive a prorated amount of the full year maximum reimbursement. Employers are also not required to cover contractors, part-time workers and seasonal workers under a QSEHRA. New hires are only eligible to participate in a QSEHRA after 90 days of employment. Take Command Health is a financial technology company and is not a bank. FDIC insurance is available for funds on deposit up to $250,000 through TransPecos Banks, Member FDIC.

• If you’re ready to explore options and compare both QSEHRA and group health insurance plans, we can help.
• While you must offer employees a group plan for them to participate in an EBHRA, they don’t have to enroll in the policy.
• This means employer contributions to each employee’s QSEHRA must be the same.
• Their success is vital to all of us, so it’s important to understand the unique challenges that small businesses face.
• The business must also not be considered an applicable large employer (ALE), e.g., it has less than 50 full-time employees.

Step 3: Set up a process to administer your QSEHRA

Pricing for administering a QSEHRA plan varies depending on the provider, but businesses can expect basic administrative fees to range from $15 to $30 per employee per month. According to a 2023 report by PeopleKeep, small businesses offered a median monthly benefit of $319 for self-only employees and $457 for employees that were married with a family. Your team will also need to stay organized and hold onto records and receipts.

Employees will receive reimbursements from the QSEHRA up to the employer specified annual limit. If employees don’t make claims or don’t claim the full amount, the money stays with the employer. QSEHRA reimbursements are typically administered via payroll and employers don’t have to pay payroll taxes on benefits paid to employees via a QSEHRA. A QSEHRA is an option that allows small businesses that don’t offer a group health insurance plan to reimburse their employees for health-related and medical costs. A QSEHRA works by reimbursing employees for medical expenses incurred during the plan year. Employees can use the money to pay for health insurance premiums, out-of-pocket costs, and other qualified medical expenses.

Once we do the first one together, you’ll feel super confident going forward. You can use spreadsheets or other software to track and store this information, but be mindful of your employees’ privacy as well as standard security procedures. Laura is a freelance writer specializing in small business, ecommerce and lifestyle content. As a small business owner, she is passionate about supporting other entrepreneurs and sharing information that will help them thrive. Employers must ensure these forms are accurately completed and submitted to the IRS, as well as distributed to employees as required.

What expenses are eligible?

For ADP RUN payroll users, Salusion provides a streamlined way to handle ICHRA and QSEHRA reimbursements. While employers have the option to process HRA reimbursements through payroll, most—over 90% of our clients—choose to let Salusion automate the process through ACH transactions. Once the plan administrator has been chosen, the business must then create a written agreement outlining the terms and conditions. New employees must then be sent written notification when they are eligible, and existing employees must have 90 days notice of the new plan year. It is important that they are informed of the open enrollment period in order to get their health coverage they need to qualify for the QSEHRA.

• An EBRHA covers excepted benefits and out-of-pocket expenses as set by the employer.
• No specific penalties apply for failing to prepare and adopt a plan document, but you’ll be fined if plan participants request to see your document and you don’t produce it.
• For 2025, the maximum amount is $6,350 for self-only coverage and $12,800 for family coverage.
• For organizations with 50 or more FTEs, known as applicable large employers (ALEs), an ICHRA is a great solution for meeting the Affordable Care Act’s employer mandate.

Your business is worried about the cost of a new HRA

This means employer contributions to each employee’s QSEHRA must be the same. So, for example, if you offer a single employee $400 per month in reimbursements, an employee with dependents would get $800 per month. This guide provides a detailed explanation of the qualified small employer health reimbursement arrangement. With a QSEHRA, employees pay insurance premiums, medical bills or other eligible healthcare expenses directly and then submit claims for employer reimbursement. QSEHRAs are limited to small businesses that have less than 50 employees and don’t offer group health coverage. Health reimbursement arrangements (HRAs), on the other hand, are available to businesses of all sizes and must be accompanied by a group health plan in accordance with the ACA.

Your documentation should include an explanation of your plan and what it covers. One of the most important benefits small-business owners can provide is health insurance. However, not all small businesses can afford to offer health insurance plans to their employees — and the passage of the Affordable Care Act in 2010 made standalone HRAs noncompliant. Unlike an ICHRA, a QSEHRA assists predominantly smaller employers (those with fewer than 50 employees) who do not offer traditional group health coverage. Under this type of option, businesses are free to help their employees to pay for certain medical expenses, such as a monthly premium.

Your organization should invest in your employees’ success with your QSEHRA by providing them with resources to understand and shop for an individual plan. This should include providing information about shopping for plans on the individual market, like the health insurance marketplace, or purchasing one directly from an insurance company or broker. While most employers prefer automated ACH reimbursements, there are situations where using ADP adp qsehra for HRA reimbursements makes sense. Nearly a quarter of them say providing healthcare to their employees is their biggest concern. QSEHRAs were rolled out in 2017 as a benefits plan that was specifically designed to help small businesses meet their employees’ needs.

The IRS defines QSEHRA eligibility differently for employers and employees. If an employee becomes eligible for a QSEHRA after the beginning of the year, the amount of reimbursements that the employee is eligible for is prorated based on when they became eligible. Even if you do qualify, there are a variety of requirements both employees and employers must adhere to. The views expressed on this blog are those of the blog authors, and not necessarily those of ADP. This blog does not provide legal, financial, accounting, or tax advice. ADP does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog.

With a GHCRA, you always know where your benefit money goes, and any unused allowance goes back to the company. A QSEHRA is a great option for small business owners and their employees for tax-free employee healthcare benefits with flexibility. If you’re interested in learning more, reach out to Workforce PayHub for our benefits administration expertise. Finally, employers have the option to set monthly caps on the reimbursement. It also allows employers to only pay when the employee has an expense, keeping more money in the employer’s control. These plans also empower employees to choose the health policy that best fits their needs.

You can do this by coordinating with a benefits specialist to help your employees choose and buy a health policy or by directing them to an online service that can assist them. Specifically, the employer must report the total amount made available to employees in Box 12, Code FF of the employee’s W-2. Salusion will provide a report with the necessary figures in December each year.

This documentation should detail the nature of the expense and confirm that it was not already covered by insurance. For example, if you added a $200/mo reimbursement for an employee, the recurring settings should carry that forward so that the employee will get the same $200/mo until changed. That means you’ll only need to make adjustments when there is a change. This makes it super easy for premium-only QSEHRAs, as the amounts will not change very often and can roll forward. For QSEHRAs that include medical expenses, you’ll need to make a quick edit each month beforehand if the amount is different. If this is the case, ICHRA is likely your top option because you cannot offer a QSEHRA to your employees based on your size.