Rolling out your company QSEHRA in 2023 is exciting and a great investment in your employee retention. Many of your employees will have questions regarding if they are eligible to participate based on the type of health insurance they carry either through the marketplace, employer group plans, faith based plans, or perhaps even no insurance at all. But the question we are talking about today is whether or not premiums can be reimbursed for an employee on a spouse's plan. Let's jump in.
Can QSEHRA reimburse for employees on a spouse's plan in 2023?
Let's talk about this tax-friendly way to offer employee insurance for small business. As your Qualified Small Emploeyr HRA QSEHRA is designed to reimburse employees for monthly health insurance premiums and medical expenses paid out of pocket your employees that are enrolled in health insurance through their spouse’s employer may wonder if they can participate in the small business HRA too.
QSEHRAs reimburse for the following:
- Health insurance premiums
- Qualified medical expenses
But which health insurance premiums does it reimburse?
The good news is that employees with insurance from their spouse’s employer (referred to as an Employer Group Plan) can and should participate in the HRA!
Employees participating in Employer Group Plan’s can utilize their monthly allowance to receive reimbursement for out of pocket expenses for themselves and their family.
Copays, deductibles, prescriptions, and more are eligible for reimbursement. Don’t forget, the reimbursements your employees receive through the HRA are tax-free when they have insurance!
What about the premiums?
Premiums paid on an Employer Group Plan are a little trickier to reimburse because these premiums are generally paid with pre-tax dollars via a payroll deduction. When the premiums are paid with pre-tax money they are not eligible for the tax-free QSEHRA reimbursement. The IRS views this as double-dipping the tax-free savings.
While the IRS does not allow for employer group plan premiums to be reimbursed through QSEHRA, they have made an exception (See Q48) that allows for employers to reimburse group plan premiums on a taxable basis.
This reimbursement would be added to the employees taxable wages and would be reported as income on the employees W-2. Take Command employers have the ability to opt-in to this added reimbursement when they create their QSEHRA.
Take Command will:
- Review the insurance coverage of the employees on group plans
- Verify monthly premium amount
- Include the amount claimed for pre-tax and post-tax reimbursements on the monthly reimbursement reports
In the rare case that your employee pays the premium with post-tax dollars for the employer group plan then the premium will be eligible for reimbursement through the QSEHRA (tax-free).
Only the premium portion the employee pays out of pocket is eligible (the employer premium portion is not eligible for reimbursement). Generally you will not find many employees participating in group plans and paying post-tax.
Still have questions about reimbursing for premiums on a spouse's group plan in 2023?
Navigating the complex world of HRAs and IRS regulations can be overwhelming. But fear not, Take Command is here to guide you through the process of setting up and administering your HRA. We'll take the reins on employee onboarding, paperwork, and meticulous details so that you can focus on what you do best - running your business.
This post was originally published in 2017 and has been update for 2023 to reflect the latest policy and regulatory changes.
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!