Providing a QSEHRA is a great way for small businesses to offer health benefits to employees, but offering a QSEHRA can be confusing when you own multiple businesses. Fortunately, the IRS has issued guidance that helps you determine if your businesses are eligible. Here's what you need to know about how to offer QSEHRA with multiple business entities.
How many full-time employees do you have?
To offer a QSEHRA, you must have fewer than 50 full-time equivalents (FTE) across all your businesses combined. If you have a combined 50 or more FTEs, then you are subject to the ACA corporate mandate, and you need to provide your employees with traditional benefits.
Page 3 of the IRS guidance says that you may not offer a QSEHRA if you are an applicable large employer (ALE), which is defined in section 4980H(c)(2) of the IRS code as an employer that has employed 50 or more FTEs in the prior calendar year, and you must not offer a group health plan (as defined in section 5000(b)) to any of your employees.
What is a “full-time equivalent” employee?
The full-time equivalent is used to determine how many employees you have under the ACA. Employees working at least 30 hours per week are considered full time. Part-time employees are counted using the full-time equivalent method of adding the total number of hours worked by all part time employees in a month and dividing by 120.
For example, if a business has 10 employees who each work 80 hours per month, they would have 800 part-time hours. Dividing by 120 gives 6.66, which is rounded down to get six full-time equivalent employees.
Do you have multiple tax IDs?
If you are not considered an applicable large employer (ALE) and you have separate tax IDs for your multiple businesses, then you can set up separate QSEHRA plans for each entity. Since the business entities are not tied to each other you do not need set QSEHRA up for every business, and you can choose which ones to offer a QSEHRA to.
Can I still offer a QSEHRA if I’m in a group of employers and one of them has a group plan?
Unfortunately, you cannot offer QSEHRA to your employees if you are in a group of employers where one has a group plan because the group is treated as a single employer under section 414(b), (c), (m), or (o).
What happens if I hire during the year and my workforce reaches or surpasses 50 full-time equivalents?
Congratulations! Your business is really growing! You can still offer the QSEHRA until you become an ALE, which happens on January 1st of the calendar year following when you reach 50 FTEs.
Although you may no longer provide the QSEHRA when you become an ALE (even if your QSEHRA has a non-calendar plan year), the QSEHRA may have a run-out period where employees can request reimbursement for medical expenses that were incurred while the QSEHRA was active.
Still have questions?
Let us know! We love talking to employers about all things QSEHRA and would be happy to answer any questions you may have. While we consider ourselves QSEHRA experts, we are not tax experts, so please check with your CPA before offering QSEHRA for multiple businesses.
If you want to dig a little deeper, check out our new QSEHRA Guide. It touches on key topics like how to set up a QSEHRA, what to look for in administration tools, rules and requirements, and FAQs!
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!