Way to go! You've decided to reimburse your employees tax-free with a QSEHRA. Trust us, your employees will thank you! So what do you do now? How do I get the funds to my employees tax-free? Here's how to automate QSEHRA reimbursements through payroll.
As the business owner or plan administrator, you have some options and get to make the choice! Remember, the tax-free nature of the QSEHRA as a small business health insurance option comes from having your plan documents in place, staying compliant, and having the proper year-end reports. With our QSEHRA platform at Take Command, we'll take care of that part for you. Each month, we'll deliver a reimbursement report so you know exactly how much to reimburse your employee.
Getting your employees the money is the final part. Here are some of the common reimbursement methods we see:
- Reimburse through your payroll system (recommended)
- Write a check
- Pay cash
- Use PayPal or another transfer service
In this article, we'll explain how to setup and make QSEHRA reimbursements through your payroll system (since the other methods are a bit more self-explanatory).
We recommend reimbursing through payroll because it makes it easy to track reimbursements, will direct deposit into your employees' accounts (assuming they have that set up), and can roll-forward automatically each month to make your job, as the administrator, much easier.
General Instructions for QSEHRA and Payroll
First, you need to make sure you have your QSEHRA set up. Setting up a QSEHRA is easier than you think if you haven't already. We are here to answer any questions you have along the way.
Depending on the payroll provider you use, you may need to talk with your payroll administrator to help. In general though, here's what you want to do:
- Open or edit your employee's pay template
- Add a recurring, non-taxable expense or reimbursement-type
- Enter the amount provided on the reimbursement report from Take Command Health
- Save or schedule for the next pay run
Most payroll systems will carry that amount forward each month. For example, if you added a $200/mo reimbursement for an employee, the recurring settings should carry that forward so that the employee will get the same $200/mo until changed. That means you'll only need to make adjustments when there is a change. This makes it super easy for premium-only QSEHRAs, as the amounts will not change very often and can roll forward. For QSEHRAs that include medical expenses, you'll need to make a quick edit each month beforehand if the amount is different. To help, you can choose the day of the month you'd like Take Command Health to deliver the reimbursement report so that you have time to make these changes before a pay run (In the admin settings, under "HRA Settings", you can change the day of the month for the reimbursement report).
Although that takes care of the month-to-month reimbursements, you'll want to be aware of year-end requirements too. QSEHRA offerings have to be reported on each employee's W2 form in Box 12 with code FF. Not a big deal now, but you'll want to talk with your CPA or payroll admin to figure out how to add that amount. Some payroll systems have codes you can use to do it automatically, some may require manual edits.
Ok, so those are the general instructions that should work for most payroll providers (again, you may need to ask someone at the payroll firm you use to help or share these instructions). If you use Gusto, Zenefits, or Quickbooks/Intuit Payroll, you can find specific instructions below!
Instructions for recording QSEHRA reimbursements on Gusto:
- Click the People tab.
- Click the employee.
- Click Add Recurring Reimbursement.
- Enter the reimbursement name. Use "Take Command Health QSEHRA" or something similar.
- Enter the reimbursement amount that will be added on each regular payroll.
- Click Save.
- Repeat the steps above for each employee that's eligible for QSEHRA reimbursements
The next time you run payroll, this amount will appear in the reimbursement field. You can edit this amount if needed before processing the payroll. Reimbursements will not be taxed and will not be reported as regular wages. Once processed, this amount will be seen as a separate line item on your employee's paystub.
Instructions for recording QSEHRA reimbursements on Zenefits:
A recurring reimbursement should be added to the employee's pay template so that the reimbursement is added to each automatically generated pay run. If there's currently a Draft run, the reimbursement will be added to that run as well.
- In payroll, click Employees, and click on the employee's name.
- Click the Pay Template tab.
- Scroll down to the Reimbursements section, and click +Add New Reimbursement.
- Choose the reimbursement type, and enter the amount.
- Repeat the steps above for each eligible employee
Instructions for recording QSEHRA reimbursements on Quickbooks and Intuit Online Payroll:
Note: These instructions are for Intuit Online Payroll. Instructions for other versions of Intuit Payroll and Quickbooks can be found here.
For Intuit Online Payroll:
- Click Employees.
- Click the employee's name.
- Click Edit in the Pay section.
- Select the Reimbursement box. (If you don't see the box, click Show all pay types.)
- Click the Add/edit types link to the right of the box.
- From the dropdown, select Add Reimbursement name.
- Enter a name like "Take Command Health QSEHRA", and click Save.
Once you've created a named reimbursement like "Take Command Health QSEHRA", you can also select it for other employees following the steps above.
Intuit also has a unique tracking code for QSEHRA reimbursements. Note, this will not actually cause the transfer of money to happen ("tracking only") but it'll automatically populate QSEHRA reimbursements on your employees' W2s at the end of the year.
Take Command is here to help
Does this all sound confusing? As the industry's leading QSEHRA administrators, are here to help you through this process! Once we do the first one together, you'll feel super confident going forward.
If you don't see your payroll system listed here, we would be more than happy to help you find out what you need to do. Chat with us on our website or schedule a call with one of our small business advocates by clicking the button below!
This post was originally published in 2019 and has been updated with new information and insights for 2023.
I wrote this blog because I care about ideas (big and little) that can help fix our healthcare system. I used to work on projects for Kaiser Permanente and the Parkland Health & Hospital System so I've seen the system inside and out. It's so important that consumers keep up with industry shifts and changing health insurance regulations. I'm also Take Command Health's Content Editor and a busy mom. Learn more about me and connect with me on our about us page. Thanks!