Small business HRAs (QSEHRAs) are gaining momentum across the U.S. thanks to the passage of the Small Business Healthcare Relief Act - a provision of the 21st Century Cures Act. This piece of legislation enables small businesses to participate in HRAs designed specifically for them. Small business HRAs are a lifeline to companies struggling to attract and retain qualified employees while competing with the bigger guys offering health benefits.
More than ¾ of job seekers say health benefits are very important to them, and 69% of employees said they would choose a position with health benefits over a higher salary.
While there are many factors to consider before setting up an HRA, one important question remains: which employees will you offer the HRA to?
To remain compliant, the QSEHRA must be made available in a fair manner to your employees. All employees are eligible to participate in the HRA.
Remember, all full-time employees are automatically eligible for QSEHRA. It is okay to just set up an HRA for full-time employees. Part-time, contractors, and seasonal workers can be excluded or reimbursed at a different rate.
You can choose to offer eligibility for your QSEHRA to part-time employees as well. However, you must offer the same allowances to both groups. This means that you can't offer full-time employees any higher of an allowance than part-time employees, and vice-versa.
You can, however, scale the amount by employee age, or family status (single, couple, or family), a fair option given that families and older employees have more healthcare needs and cost more.
As long as everyone that fits the criteria you set is treated fairly, you're good to go.
There is no minimum contribution a company can make, but the annual contributions for QSEHRA in 2023 are $5,850 for individual employees (this adds up to $487.50 per month) and a contribution of $11,800 for employees with a family (this adds up to $983.33 per month).
Which employees are eligible for QSEHRA?
Which employees are eligible? The majority of W-2 full-time employees of a small business choosing to participate in a QSEHRA are eligible. Any full-time staff, which the program defines as working at least 30 hours a week for at least 120 consecutive days, is eligible. If necessary, the following individuals may be excluded from your QSEHRA plan:
- Employees who have not completed 90 days of service
- Employees under age 25
- Part-time and seasonal employees
- Union employees (unless the union agreement provides for eligibility)
- Non-resident aliens without income from sources within the United States
Where to start
Setting up an HRA can be confusing, and that’s why it pays to find an advisor you trust. The experts at Take Command will help you come up with an efficient HRA design that is compliant with all the rules. Once your HRA is established, our advisors will help your employees choose a plan that fits their needs.
This post was originally published in 2017 and has been updated in 2023.
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!