We get a lot of questions from small businesses asking if they can or should offer a QSEHRA and HSA together for their employees. We think offering both benefits together is a great way to maximize benefit dollars. But there are a few things you need to understand before you sign up.
Offering your employees benefits is a great way to keep them engaged in your business. Determining the appropriate benefit to offer is tough, especially when you are trying to maximize your dollars.
What’s the difference between QSEHRA and HSA?
QSEHRA (Qualified Small Employer Health Reimbursement Arrangement):
- Funded entirely by Employer (no employee contributions)
- Account owned by Employer- funds stay with employer if employee leaves company
- Reimburses health insurance premiums and medical expenses
- Money is reimbursed for expenses/premiums after they are incurred and receipts are provided
- Employees must have health insurance (minimum essential coverage) to participate
- Tax benefits: Tax free for both employee and employer
HSA (Health Savings Account):
- Funded by both employer and employee
- Owned by Individual; employee takes funds with them when they leave
- Employee has immediate access to money in account
- Funds only for medical expenses that fall under the health plan’s deductible
- HSA funds cannot be used for insurance premiums
- HSA participants must have a High Deductible Health Plan (HDHP)
- Tax benefits: tax deductible contributions, tax free reimbursements, and tax free accumulation of interest and dividends
Can I offer a QSEHRA and HSA together?
If your company would like to offer your employees both the QSEHRA and HSA together there are a few important things to note. In order to contribute to your employees HSA, the QSEHRA will need to be set up to reimburse premiums only. This way the QSEHRA will be HSA eligible. Employees will use the QSEHRA to reimburse their health insurance premiums, and the HSA to cover their medical expenses.
The IRS puts limits on how much employers can contribute to the funds each year. The IRS has increased the limits for 2021.
|Individual Maximum Rate||$5,300||$3,600|
|Family Maximum Rate||$10,700||$7,000|
Need more help with QSEHRA and HSAs?
Excited to offer your employee benefits, but not sure where to start? It's easier than you think, and Take Command can help! Schedule a call with one of our knowledgeable teammates and we can help you determine the benefit right for your company.
Hungry for more? Check out the QSEHRA requirements chapter in our handy new QSEHRA Guide!
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!