Looking for health insurance for your household employees? In today’s busy world, a trusted nanny, maid, groundskeeper or even a driver might help you run your house like a well-oiled machine. It’s in your best interest to keep them happy—and healthy. Why not offer health insurance for household employees as a perk? There’s a new law that no one is talking about that lets you do this tax-free. It’s called a QSEHRA (a.k.a. Qualified Small Employer Health Reimbursement Arrangement). Think of it as an employee retention strategy.
Tax-free health insurance for household employees
Read on to learn more about QSEHRAs, how they work, who's eligible and valuable benefits you can offer your household employees for free.
Introducing QSEHRA, the new way to do health insurance for your nanny, your butler, your tutor or your chef
"Corporate" benefits for household employees: The most important thing about the QSEHRA is that it allows you to reimburse household employees tax-free for individual health insurance premiums and medical expenses.
This is a big deal because your household can be considered a business and get the same favorable tax treatment as big company group health plans but with a lot less hassle. For most, providing health insurance for household employees is otherwise cost-prohibitive.
Take care of those loyal household employees. Where would we be without them?
Customizable: You can now give your household employees a fixed dollar amount each month based on your budget, say $200, and each employee can then shop for the plan that fits his or her needs the best and use your contributions for qualified medical expenses.
Since your nanny might need Blue Cross for her doctor and your maid might prefer Aetna to cover her prescriptions, this helps everyone customize based on their needs.
At the end of each year, any unused funds from the HRA can be rolled over and used in future years which will be an incentive to your employees to seek medical care and remain a part of your household team.
Tax Benefit: An arrangement like this is a tax benefit for you and your household employees. For you, any contributions made to the HRA are tax deductible and for the employee, these are tax free, not deducted from their salary, and excluded from their gross income.
The Ground Rules
Her are the QSEHRA ground rules.
- Small businesses (your household, in this case) with less than 50 employees are eligible. That means even if its just your nanny, you still qualify. Unless you have more than 50 household employees and live at Downton Abbey, you probably qualify.
- Employers can contribute no more than $5,150 annually for an employee (or $10,450 annually if expenses are also to be paid / reimbursed for families).
- Salary deductions aren't allowed.
- You must provide the exact options to every single household employee.
- The employee must have their own individual health insurance in order to qualify for the arrangement with the employer and must provide appropriate documentation.
- Your household must have an EIN, or Employer Identification Number. This will essentially allow your home and household employees to be considered a small business in the eyes of the IRS.
- You must withhold taxes from your household employee’s paychecks and wages must be filed on a W-2.
Choosing their own individual plans puts a lot of pressure on the employees, so our team at Take Command is here to help employees choose the best plan for their family, their specific needs and their preferred doctors.
What’s reimbursable and what’s not
Your household employees can use the HRA funds for qualified medical expenses, which typically include:
- prescription drugs
- hospital and surgical fees
- dental and eye care
- long term care (like disability)
- insurance premiums
- diagnosis of medical needs
- routine healthcare
- transportation to and from medical services or appointments
Not everything is reimbursable. Expenses that promote general health but aren't prescribed by a physician for a specific medical ailment aren't reimbursable, like multivitamins or exercise equipment.
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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!