Wondering how the small business HRA works or how QSEHRA works? These tax-advantaged benefits solutions are designed specifically for small businesses like yours. Here's how it could work for you.
Small business owners know that retaining good employees is tough when you can’t afford to offer group health insurance. Rising healthcare costs aren't helping anything.
Trying to find a one-size-fits-all plan for your employees is exhausting (and often impossible)! But now small business owners are able to set up a Health Reimbursement Account (HRA) for their employees called a QSEHRA that offers major tax benefits and customizable plans!
What is a small business HRA?
Here's the fine print on the small business HRA.
The small business HRA is a company funded, tax-free health benefits plan used to reimburse employees for individual health insurance and medical expenses.
In order to participate in the small business HRA, the following criteria need to be met.
- Businesses must have fewer than 50 full time employees
- Cannot be combined with a group health plan
- Businesses use the HRA to reimburse employees tax-free for health insurance premiums and other out-of-pocket medical expenses.
- A company's annual contributions are capped at $4,950 for a single employee and $10,000 for an employee with a family. HRAs are 100 percent company funded and employee contributions are not allowed.
- Employees with a Small Business HRA are required to have minimum essential coverage to receive HRA reimbursements.
- Employees with a Small Business HRA may access premium tax credits. However, if an employee is eligible for a premium tax credit, the amount of the credit will be reduced by the monthly HRA amount.
- Generally, a company must make the same HRA contributions for all eligible employees. However, amounts may be varied based on family status or employment status such as part-time or full-time.
How does QSEHRA work? How does the small business HRA work?
These two terms describe the exact same thing, and thus, they work in the same way.
Luckily, the mechanics are quite simple.
Employers choose an employee benefits budget that works for them and employees shop for an individual health plan on their state exchange or the ACA exchange. They then get reimbursed for their premium payments on their paycheck. It's a win-win!
Small business HRA: which one is right for you?
If you are still trying to wrap your head around how you will administer the HRA, Take Command can help. Enrolling in our new small business platform is easy, and our expert advisors can help you determine your contributions and benefits. Take Command Health will handle all the legal paperwork, take care of the on-boarding process for your employees, and make tax-time easy and painless.
Learn more about QSEHRA!
Hungry for more? Check out the overview chapter in our handy new QSEHRA Guide!
If you want to explore what types of small business HRAs are right for your company, our Small Business HRA Strategy Guide is another great place to start for optimizing your tax savings.
Want to see if an HRA could work for your small business? Learn more about small business health insurance options or schedule a call with one of our small business HRA experts today.
I wrote this blog because I love helping people decode confusing insurance jargon and understand the fine print. I'm a licensed health insurance professional and specialize in simplifying health insurance for individuals and small businesses. My QSEHRA articles have been featured regularly on Accounting Today, Accounting Web, HRWeb, and other industry publications. I'm also a member of Take Command Health's client success team and a full-time mom. Learn more about me and connect with me on our about us page. Thanks!