REIMBURSEMENT PLANS FOR SMALL COMPANIES’ HEALTH CARE COSTS

Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) are a tax-free way for small companies without group health plans to help their workers pay for medical expenditures, such as the premiums for health insurance. Learn more about QSEHRAs and what they may offer your small company here.

Background

Qualified small employer health reimbursement arrangements (QSEHRAs) were made possible by the 21st Century Cures Act, which was passed by Congress on December 13, 2016. These arrangements are not considered group health plans and are therefore exempt from many of the regulations that normally apply to such plans.

The following are requirements for qualified small employer health reimbursement arrangements (QSEHRAs): • the arrangement is funded solely by an eligible employer and no salary reduction contributions may be made under the arrangement; • the arrangement is generally provided on the same terms to all eligible employees of the employer; • the arrangement provides, after the employee provides proof of coverage, for the payment or reimbursement of medical expenses incurred by the employee or the employee’s family; and • The arrangement provides for the payment or reimbursement of medical expenses incurred by the employee For the year 2022, the highest allowable sum for such agreements limited to workers is $5,450. Payments and reimbursements for family members’ costs may total no more than $11,050 per agreement.

In other words, what kinds of companies are eligible?

As long as they follow the guidelines, any small organization, from a startup to a charity, that does not have a group health plan may establish a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) (see below). For the purposes of this definition, an organization is considered a small employer if it does not fall under the category of “applicable big employer” (ALE). In this context, “suitable big employer” is an organization that regularly employs 50 or more people for full-time positions.

In the event that a small business with an existing group health plan wishes to establish a QSEHRA, the group health plan must be terminated.

Does It Follow That There Aren’t Any Other Regulations?

Yes. In order to qualify for a QSEHRA, workers must have health insurance that fulfills minimum necessary coverage requirements. Indemnity plans, temporary health insurance, and religiously inspired health plans like Liberty Health Share are not acceptable. Plans available via the Health Insurance Marketplace satisfy this requirement. Employers have the option of either fully or partially reimbursing their workers for medical expenditures and health insurance premiums.

In addition, there is no lower restriction on monthly contributions, but there is a maximum limit of $12,400 each year. The limits for 2022 are $454.16 for individuals and $920.83 for families.

The employer pays the whole cost of a QSEHRA. Staff members are thus barred from making any financial donations.

Communications with Employees in Writing

At least 90 days before the start of the year for which the QSEHRA is issued, an eligible employer must offer written notification to eligible workers. If an employee is not eligible to engage in the arrangement at the beginning of the year, written notification must be sent as of the first day on which the employee is entitled to participate. In the letter, you need to mention the following details:

Include the following information for each eligible employee: 1. the amount that would be the eligible employee’s permitted benefit under the arrangement for the year; 2. a statement that the eligible employee should provide the amount that would be the eligible employee’s permitted benefit to any health insurance exchange to which the eligible employee applies for advance payments of the premium tax credit; and 3. a statement that the eligible employee may be liable for an individual shared responsibility payment if the eligible employee is not covered under minimum essential coverage for any month.

Do You Have Any Concerns About QSEHRAs?

Do not hesitate to give us a call if you have any inquiries regarding QSEHRAs or if you think your small company may benefit from implementing a QSEHRA.

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Glendale

Tetyana Ser-Manukyan | Glendale Location Manager

Tetyana is a 2nd generation accountant and the Founder of Integrity Accounting Solutions, Inc. She is a meticulously organized and detail-oriented professional with over 23 years of experience in accounting industry.

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Marilyn Motsenbocker | Long Beach Location Manager

With more than 35 years of experience in accounting and finance, her managerial expertise and knowledge add value to our firm and complement the well-being of our customers.

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