What Is a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)?

What Is a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)?

If a tiny leader does not connection radical wellness security coverage, it whitethorn supply a qualified tiny leader wellness reimbursement statement (QSEHRA) instead.

With a QSEHRA, employers with less than 50 full-time employees tin supply tax-free reimbursements for an employee's qualifying aesculapian expenses. Medical expenses see premiums, prescriptions, co-pays, and more.

Typically, employees person wellness security done their employers, which is known arsenic group wellness insurance. Yet for tiny businesses, purchasing radical wellness security tin beryllium costly. A QSEHRA offers tiny employers a cost-effective mode to assistance screen employees' wellness security expenses without needing to sponsor a radical wellness security plan.

Typically, successful bid to connection a QSEHRA, employers indispensable conscionable the pursuing requirements:

• Don't connection a radical wellness program oregon a flexible spending relationship (FSA)
• Have less than 50 employees
• Provide the aforesaid wellness reimbursement statement to each full-time employees

Which Employees Are Eligible For a QSEHRA?

Businesses are required to pass employees that they're eligible for a QSEHRA.

Employers indispensable supply employees with a written announcement regarding their QSEHRA eligibility astatine slightest 90 days earlier the opening of a caller program year. However, if an worker is not eligible astatine that time, a concern is required to notify the worker erstwhile they archetypal go eligible.

Some employees whitethorn not beryllium eligible for QSEHRA adjacent if their leader offers one. The pursuing types of employees whitethorn not qualify:

• Employees who person not completed 90 days of service
• Employees who are not astatine slightest property 25 earlier the opening of the program year
• Part-time oregon seasonal employees
• Employees covered by a corporate bargaining agreement, if wellness benefits were the taxable of bully religion bargaining
• Employees who are nonresident aliens with nary earned income from sources wrong the United States

How Does a QSEHRA Work?

In bid to person tax-free reimbursements for aesculapian expenses done a QSEHRA, employees indispensable beryllium enrolled successful a wellness security program that meets the Affordable Care Act's (ACA) Minimum Essential Coverage (MEC) requirements. Typically, wellness security plans disposable connected the speech conscionable the MEC requirements, too.

Employees are required to supply impervious of MEC for themselves and immoderate dependents whose expenses volition beryllium reimbursed. Acceptable impervious includes:

• Third-party documentation, specified arsenic an security paper oregon Explanation of Benefits (EOB), on with an worker attestation confirming that the sum qualifies arsenic MEC; or
• An worker attestation stating that they (and immoderate covered dependents) person MEC, including details similar the sum commencement day and the sanction of the security provider.

This impervious indispensable beryllium submitted earlier immoderate reimbursements tin beryllium made. For each consequent reimbursement request, employees indispensable beryllium MEC is inactive successful spot for the play during which the aesculapian disbursal was incurred.

Similar to Health Savings Accounts (HSAs), employees indispensable supply documentation to substantiate their aesculapian expenses to person reimbursements from their employers. This documentation should item the quality of the disbursal and corroborate that it was not already covered by insurance.

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) Contribution Limits

Small businesses tin take however overmuch they privation to reimburse, but each full-time worker indispensable beryllium eligible for the aforesaid reimbursement amount.

While there's nary minimum magnitude that employers indispensable reimburse, determination is simply a maximum amount. For 2025, the maximum magnitude is $6,350 for self-only sum and $12,800 for household coverage.

If an worker becomes eligible for a QSEHRA aft the opening of the year, the magnitude of reimbursements that the worker is eligible for is prorated based connected erstwhile they became eligible.

If an worker doesn't usage their afloat QSEHRA allowance, the leader keeps the unused funds, but they tin rotation them implicit to the adjacent year.

The Bottom Line

A QSEHRA lets tiny businesses that don't supply accepted radical wellness security connection tax-free reimbursements for employees' aesculapian expenses. To qualify, employers indispensable person less than 50 employees and can't connection a radical program oregon an FSA.

Not each employees are eligible, arsenic they whitethorn person to conscionable definite property and employment criteria. For 2025, reimbursement limits are capped astatine $6,350 for individuals and $12,800 for families.