Health reimbursement arrangements are tax-advantaged benefits solutions that allow business owners to help employees pay for benefits tax-free. The Qualified Small Employer HRAs allow small business owners to reimburse their employees for health premiums and qualified medical expenses. QSEHRA is available to companies with less than 50 full time equivalent employees and it has its limits in terms of monthly reimbursement rates. What is the QSEHRA max? Rates for 2021 have just been announced, so let’s check it out!
Looking for 2022 QSEHRA maximum reimbursement rates? We've got a post for you.
QSEHRA refresher
As a reminder, with the QSEHRA, the general idea is this: employers simply reimburse employees when a health expense occurs. There is no pre-funding of accounts.
If employees don't submit receipts for reimbursement or do not need medical care, the leftover funds stay in the employer's pocket.
What is the 2021 QSEHRA reimbursement maximum?
Changes in annual QSEHRA rates are typically tied to inflation, so we expect them to go up a little bit every year. In fact, since its inception, we’ve seen a steady increase annually of about $100 for individuals and $150-200 for families.
This past year, the 2020 QSEHRA contribution rates were as follows:
- Individual $5250 or $437.50/month
- Family $10,600 or $883.33/month
The 2021 QSEHRA limits have now been announced:
- Individual $5,300 ($441.67/month)
- Family $10,700 or ($891.67/month)
2022 limits:
- Individual: $5,450/ Annually ($454.16/ Monthly)
- Family: $11,050/ Annually ($920.83/ Monthly)
All QSEHRA reimbursements are subject to annual maximums and become available to employees on a monthly basis. This means employees can’t take the full annual amount in January—instead, the funds become available to employees each month.
Helpful resource → Learn about the 2021 individual health insurance rates and the state of the market.
Another HRA option
There is an alternative HRA option which doesn’t have a contribution limit. The individual coverage HRA, or ICHRA, can be thought of as a “super charged” version of the QSEHRA.
While there aren’t any contribution limits with ICHRA, there is the issue of how little you can actually contribute, which changes from year to year.
The minimum amount is determined by the issue of ICHRA affordability and how the HRA interacts with premium tax credits. The affordability threshold is the highest percentage of household income an employee can be required to pay out of pocket for monthly health insurance premiums.
The IRS has announced an increase to the affordability threshold to 9.83% of employee pay for 2021. This is a slight increase from the 9.78% allowed for 2020.
Reimbursing with ICHRA and QSEHRA
ICHRA also has another feature for those who want to offer their employees different amounts. While QSEHRA requires that all employees are reimbursement equally and that amount is only allowed to be scaled based on age or family size, ICHRA offers 11 different employee classes that represent different buckets for an employer to offer different amounts to.
Again, it's a great option for some businesses and we are here to help you make the right decision for your company.
Still have questions about the QSEHRA max?
While there are numerous differences, the primary contrast when you compare QSEHRA vs. ICHRA is eligibility based on company size and design flexibility.
Our team of experts are standing by to answer your questions about these HRAs.
In the meantime, you can check out our comprehensive QSEHRA and ICHRA guides.
