You've probably heard a thing or two about the many advantages of the QSEHRA for small business owners. Our favorite part? Freedom. The freedom to choose a contribution amount that works for your budget, and the freedom to customize the design to help your bottom line.
But in the midst of all of this freedom, there's a few rules you need to know about when designing your HRA. We’d like to lay out the options here, in one place, so that you can see them in a concise and simple way.
How to design your QSEHRA to work for your budget
While you as a small business owner can choose who to extend QSEHRA reimbursements to, you must make sure your extensions are chosen fairly and without discrimination. For example, you cannot pay 50% of your employees' premiums and 100% of premiums for managers.
An overarching rule though is that all full-time employees must be treated fairly, as the IRS outlines in “same terms requirements.” What you can do, however, is use small business HRA design criteria to divide your employees into groups. Once you do that, you can decide what amount to extend to each of those groups.
HRA Design Criteria
Come one, come all: One of the simplest and most straightforward options is to reimburse the same amount to each employee.
As an example, all employees receive $250 each month regardless of age, family size, status, etc.
Max it out: Another simple option is to reimburse each employee the maximum amount. This amount would change slightly each year.
As an example, in 2018, all single employees would get $420 per month and all employees with dependents would get $854 per month.
Family size: Like the option listed above, you can reimburse different amounts based on family size. You have the ability to set different rates based on an employee’s dependents. The IRS requires that employers choose a reference plan or offer a fair percentage of the maximum.
For example, single employees get $200 each month, married employees get $300 each month, and employees with families get $400 each month.
Age: Last option we have for you would be to reimburse different amounts based on employee’s age. This might not seem fair, but it's an unspoken truth that older employees need access to healthcare more often than the young and healthy. Employers can vary rates by age, but they must be tied to a reference plan on the individual market. To help figure out this model, most marketplace plans offer premiums in a 1:3 ratio for individuals ages 26 to 64.
As an example, you could set reimbursement rates for a 26-year-old $100 per month and a 64-year-old $300 per month, using the 1:3 ratio. A 37-year-old employee gets whatever amount on the linear line in between the 26 and 64-year-old. In this case, it's $158 each month.
Fair treatment for all, unless...
As an employer, you can decide whether or not to extend QSEHRA benefits to the following groups:
- Part-Time Employees
- Seasonal Employees
- Employees Under 26
- Employees on their spouse’s plan
Let Us Help!
If you’re looking to set up a small business HRA, Take Command Health’s new small business platform can help. We’ll take care off all of the accounting and legal legwork, handle the onboarding of each employee, and make tax-time easy and painless. You’ll never have to worry about the hassle with receipts or worry about choosing a health plan again. Trust us, it’s easier than you think.
Need help designing your QSEHRA, finding a reference plan, or choosing an appropriate reimbursement rate? Contact us by hitting the orange button below.