QSEHRA– The 21st Century Cures Act Creates a New Health Care Plan Option for Small Employers
QSEHRA — (Qualified Small Employer Health Reimbursement Arrangement) the 21st Century Cures Act (Cures Act) allows small employers (with fewer than 50 full time equivalent-FTE-employees) to offer a tax-favored health reimbursement arrangement to their employees, without having to satisfy the additional market requirements of the Affordable Care Act (ACA).
These plans are qualified small employer health reimbursement arrangements (QSEHRAs). Originally enacted in December 2016 – too late for most employers to take advantage of this plan for 2017-but definitely something that should be considered for 2018.
Many small employers can’t afford to sponsor medical plans that meet ACA’s group plan standards and can no longer sponsor stand-alone HRAs to help employees pay for individual insurance policies. The Cures Act has addressed this problem by enabling qualified small employers to sponsor a stand-alone HRA that meets QSEHRA standards without also having to offer a comprehensive medical plan.
Additionally, active employees can use their QSEHRA dollars to pay the premiums of major medical insurance policies sold in the individual market — including on public insurance exchanges — an option not available with ordinary HRAs.
2017 Funding and Reimbursements
Funding for these plans must be by the employer only. The employer determines the amount of contribution up to certain maximum limits. For 2017, reimbursements are limited to $4,950 for employee-only coverage and $10,000 for family coverage. These amounts are prorated for employees who participate in the QSEHRA for a partial year and the maximum dollar amounts are subject to cost-of-living indexing for future years.
With QSEHRA, the employer can reimburse employees for medical care as defined under Code Section 213(d), including individual major medical health insurance premiums and other IRS-recognized medical expenses. The employer can choose to cover only the insurance premiums. Coverage generally must be uniform, although each employee’s “permitted benefit amount” can vary as long as these amounts are tied to a designated benchmark insurance policy.
The employer has additional administrative duties, such as annually adding this to the W2, sending notice to employees of the benefit 90 days prior to the beginning of each plan year, and providing a plan document and summary for employees. If benefits are provided for other IRS-recognized medical expenses, there must also be provision for reimbursement of those expenses.
Mercer PeoplePro Can Assist with QSEHRA Planning
Mercer PeoplePro is here to help you determine if this option would work for your company. If you feel you could use some help navigating this complex landscape, Mercer PeoplePro can help. We’ll even give you a free consultation, plus 2 free hours towards your first project. To set up your free consultation, visit MercerPeoplePro.com — we’re standing by and ready to assist.