Qualified Small Employer Health Reimbursement Arrangements (QSEHRA) offer a valuable healthcare solution for small businesses. Not only do they provide employees with the freedom to select their own healthcare, but they also offer tax advantages to both employees and employers.

If you want to provide health benefits to your employees without the complexities and costs associated with traditional group health insurance plans, take a look at QSEHRAs. Once you understand the benefits and flexibility of a QSEHRA, you’ll be able to offer competitive health benefits that meet your budgetary constraints and support your employees’ health and well-being.

Understanding QSEHRA

A QSEHRA allows small employers (with up to 49 full-time employees) to reimburse their employees tax-free for out-of-pocket medical, dental, and vision expenses, including individual health insurance premiums. Unlike traditional healthcare plans, a QSEHRA gives employees the power to choose their own provider. And QSEHRAs are tax-deductible for the employer. A win-win for both!

Here’s how QSEHRAs work:

  1. Employer Setup: The employer decides on a fixed amount to contribute annually to each employee’s QSEHRA. For 2025, the maximum contribution limits set by the IRS are $6,350 for individual employees and $12,800 for employees with families.
  2. Employee Notification: Employers must provide written notice to employees about the QSEHRA. This notice must be given 90 days before the start of the plan year or on the first day of eligibility for new employees​​. The notice must include details on how much will be contributed to the employee’s QSEHRA and information about tax penalties that could occur if the employee does not maintain Minimum Essential Coverage.
  3. Employee Enrollment: Employees must have and maintain health insurance that meets Minimum Essential Coverage (MEC) standards. This coverage can be in the form of an individual’s plan, a spouse’s or parent’s plan, or other qualifying coverage​​.
  4. Reimbursement Process: With Flyte, the reimbursement process is simple. Employees pay for their own medical expenses out of pocket and then submit proof of these expenses to Flyte through their online Health Account Manager. Flyte verifies the expenses and reimburses the employees directly​​​​.
  5. Tax Benefits: Reimbursements are tax-free for both the employer and the employee, provided the employee has MEC. This tax advantage makes QSEHRA an attractive option for small businesses​​​​.

Benefits of QSEHRA

QSEHRAs offer numerous benefits to both employers and employees, in addition to the tax advantages:

  1. Cost Control: Since employers have full control over QSEHRA contributions, they can better manage their healthcare budget and build a plan that fits their financial situation. For small businesses with limited resources and funds, this is a huge advantage​​​.
  2. Flexibility: Unlike traditional group health plans, QSEHRAs do not require the employer to choose a one-size-fits-all insurance plan. Employees can select health insurance and providers that best meet their needs, increasing employee satisfaction and retention​​​​.
  3. Year-Round Enrollment: Employers can begin offering a QSEHRA any time during the year. There is no specified start date. This unique option allows businesses to adapt to changing financial circumstances and their employees’ needs without being tied to a specific enrollment period​​.
  4. Compliance and Simplification: Managing employee contributions, reimbursements, and compliance for a QSEHRA can be complicated, but Flyte makes it easy on employers. Offload the administrative burden to us and let us take care of reimbursements, compliance with IRS regulations, transaction management, substantiation of expenses, and all the necessary documentation​​.

Setup Your QSEHRA Today with Flyte

Managing a QSEHRA plan can be an easy and streamlined process with the right administration platform. Flyte offers an efficient solution, ensuring compliance and simplicity:

  • Easy Setup: Flyte’s administration platform walks you through the steps of designing and launching your QSEHRA plan. Our team is just a phone call away to answer any questions during the process, and our platform will handle all legal plan documents, paperwork, and reimbursements, making the plan launch seamless and efficient​​.
  • Customizable Options: Employers have a wealth of customization options with a QSEHRA including how much to reimburse, what expenses are eligible, and which employees are included. Flyte’s platform supports easy plan customization to fit the unique needs of each business​​.
  • Written Notice to Employees: Flyte provides the initial notice to your employees and, if you’re starting a plan mid-year, this notice also creates a special enrollment period for employees to gain access to individual health insurance.
  • Employee Enrollment: All qualified full-time and part-time employees (if the plan allows) can enroll through Flyte’s administration platform. Each employee receives login instructions and access to our employee support team.
  • Submit and Manage Claims: Once medical, dental or vision expenses are incurred, employees can submit these expenses through Flyte’s online Health Account Manager or via our mobile app. Flyte ensures compliance with IRS rules by verifying expenses before reimbursement​​​​.
  • Ongoing Support: Both employers and employees have ongoing access to the Flyte support team when questions arise.
  • Monitor and Adjust: Employers can continuously monitor the QSEHRA plan’s performance and adjust as necessary via our administration platform. When new employees are hired or if you want to revise contribution amounts, simply login and make changes.

Learn more about QSEHRAs at FlyteHCM.com or connect with us for a brief demo of our administration platform and to learn how easy it is to realize the tax savings of a QSEHRA plan.