2021 QSEHRA contribution limits have been announced by the IRS. Slightly higher than last year, these HRA reimbursement limits represent the maximum amount an employer can reimburse their employees for health insurance using the Qualified Small Employer HRA.
As a reminder, Qualified Small Employer HRAs (QSEHRAs, for short) allow small business owners to reimburse their employees for health premiums and qualified medical expenses. QSEHRA is available to companies with less than 50 full time equivalent employees and, unlike the Individual Coverage HRA, it has its limits in terms of monthly reimbursement rates.
Employers looking to set their benefits budgets for 2021 now have the information they need.
All reimbursements are subject to annual maximums and become available to employees on a monthly basis. This means employees can’t take the full annual amount in January—instead, the funds become available to employees each month. Although if they do submit a medical expense that exceeds their reimbursement limits, they can be paid out on a monthly basis.
What are the 2021 QSEHRA contribution limits?
Changes in annual QSEHRA rates are typically tied to inflation, so we expect them to go up a little bit every year. In fact, since its inception, we’ve seen a steady increase annually of about $100 for individuals and $150-200 for families.
This past year, the 2020 QSEHRA contribution rates were as follows:
- Individual $5250 or $437.50/month
- Family $10,600 or $883.33/month
The 2021 QSEHRA limits have now been announced:
- Individual $5,300 ($441.67/month)
- Family $10,700 or ($891.67/month)
The increase in the QSEHRA annual limit is in line with the increases we've seen in the past.
What if I want to reimburse my employees more than the annual QSEHRA contribution limit?
For some businesses, depending on local market factors and their company makeup, monthly QSEHRA limits work great for their employees to be able to choose a quality MEC plan. For some employers, however, they want to offer more than the QSEHRA contribution limit.
For those folks, there's a new HRA called the Individual Coverage HRA that has no contribution limits. It's worth checking out if the limits are a concern. Again, what's best for one business isn't necessarily the best for another. Our team is on hand to help guide you through this decision!
We're here to help!
Our team is here to make setting up an HRA for your business quick, easy, and headache-free. Our team will help you set your budget, take care of the admin paperwork, and help your employees pick a plan that suits their needs. From there, we do the heavy lifting! In fact, 84% of our clients report that they spend less than an hour each month administering their HRA.