The new small business HRA called QSEHRA helps small companies retain employees. But it seems to come with a lot of questions and confusion. We're here with all the answers surrounding Qualified Small Employer HRAs!
We're privileged to have helped thousands of business owners set up a QSEHRA and here are some of the frequently asked questions we hear most.
FAQs for Qualified Small Employer Health Reimbursement Arrangements
As a reminder, QSEHRAs (or Qualified Small Employer HRAs) are a fundamentally new way of doing benefits, where small businesses with less than 50 employees can reimburse their employees tax-free for health insurance premiums and medical expenses.
What are the minimum/maximum amounts I have to contribute for a QSEHRA?
Small business HRAs do not require a minimum contribution. We recommend at least 50% of a Bronze plan premium, but ultimately the contribution amount is up to you.
For 2021, the maximum HRA contribution is $5300 for single employees and $10,700 for families. These amounts will go up each year with inflation.
Can I contribute different amounts for my employees?
To remain compliant, the HRA must be made available in a fair manner to your employees. You can vary rates based on employee stats (full-time vs part-time), employee age, or family status (single, couple, or family). As long as everyone that fits the criteria you set is treated fairly, you are good to go.
Part-time, contractors, and seasonal workers can be excluded or reimbursed at a different rate.
Are QSEHRA contributions and reimbursements subject to payroll and income tax?
Nope! There are many things to like about small business HRAs but not having extra taxes to pay are definite perks.
What happens with a QSEHRA when a new employee joins the company or someone leaves?
When a new employee joins, they can join the HRA right away or be required to wait up to 90 days before being eligible for HRA reimbursements. Your HRA administrator will help you set the waiting period (if any) when creating your HRA.
When an employee leaves, they will no longer receive reimbursements. Your employee will still have health insurance coverage since they purchased it privately.
When can we start the small business HRA?
You can set up the HRA and start making reimbursements at any time.
Employees need to have qualified health insurance coverage to be able to participate. Once employees have proven their coverage (either through their plan or spouse’s plan) they are ready to participate. If your employees need to purchase a plan, they can do so during Open Enrollment (Nov1-Dec 15 each year) or see if they qualify for a Special Enrollment Period during the year (divorce, marriage, having a baby, etc are qualifying events).
Note: If you currently offer a group plan, canceling it will trigger a special enrollment period and allow your employees to purchase an individual plan.
How do I set up the small business HRA?
Setting up an HRA doesn’t have to be difficult. The first step is to find an advisor you trust to guide you through the process. 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 and handle the onboarding process.
More questions about QSEHRAs?
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!