QSEHRA
Qualified Small Employer HRA
QSEHRA – a contemporary benefit plan
that grants employers with 50 or fewer employees the ability to contribute toward both the premium and medical costs that their employees’ payout annually.
A QSEHRA plan permits employers to compensate employees with tax-free benefits plans that can be utilized to fund qualifying costs. The amount of money spent on insurance is reduced for all parties involved due to the fact that companies and their staff members are not required to pay taxes on cost repayments.
HOW DOES QSEHRA WORK?
There are 4 simple steps involved in the process of implementing a QSEHRA plan:
- Businesses create compensation packages that suit their organization’s needs and budgets.
- Employees make the initial payments on their insurance and other medical costs and then provide evidence of those costs to their organization.
- Employers, or QSEHRA administrators such as Flyte HCM, review and approve submissions for all eligible expenses.
- Flyte then initiates reimbursements to employees
A QSEHRA plan allows businesses with a small staff to implement benefits without engaging in all complexities that accompany conventional insurance arrangements. A QSEHRA plan also provides employees with autonomy and the ability to decide on a plan that best meets their individual needs, as opposed to being made to select from the few standard options offered by their employer’s group plan. Businesses contribute a set amount of money to each of their staff members every month, and employees get to use that compensation to fund their insurance plans or other permitted health-related costs tax-free. Everybody Benefits!
WHAT ARE ELIGIBLE QSEHRA EXPENSES?
Expenses that are eligible for reimbursement are determined by IRS Code Section 213(d) and, in the case of a QSEHRA plan, a variety of employee-paid health insurance premiums are eligible.
Rules regarding a QSEHRA plan declare that in order for a company to provide these types of plans to their staff members, they need to:
- Refrain from providing a group healthcare plan.
- Employ fewer than 50 full-time equivalent staff members.
- Properly communicate and provide any related documents or notifications to employees.
All full time employees are enrolled in QSEHRA, with the exception of those that are ineligible based on one or more of the eligibility criteria of the insurance plan. These criteria include but are not limited to, seasonal or part-time staff members, those who have not yet been employed by the organization for 90 days, and those who are less than 25 years old. Flyte can support companies in maneuvering the eligibility criteria.
Businesses providing QSEHRA cannot offer additional group health, dental, or vision insurance.
Eligibility requires that employees must:
- Receive coverage from a health insurance policy, whether it be an individual insurance plan, spouse’s group plan, or a parent’s plan to name a few.
- File evidence of qualifying costs to collect repayment. The Flyte Mobile App and Flyte’s Health Account Manager provide a simple way to submit and receive repayments.
WHAT ARE THE BENEFITS OF A QSEHRA?
Eligible plans are tax-free.
Businesses can offer unique benefits to potential employees.
The budget is chosen and maintained by the company itself.
Every employee is able to reap related benefits.
Enrollment is consistent and year-round.
Frequently Asked Questions
What are eligible expenses?
QSEHRA expenses that are eligible for reimbursement are determined by IRS Code Section 213(d) and, in the case of a QSEHRA plan, certain employee-paid individual health insurance premiums are eligible.
How does QSEHRA work for employees?
It’s simple! To be eligible, employees must provide you with proof that they are covered with minimum essential coverage (MEC). Tax consequences may result if there is failure to do so, including the employee being taxed for employer reimbursements. The employer or a plan administrator, like Flyte HCM, must confirm all employee expenses for reimbursement.
HOW DO I BEGIN?
There are some simple, yet necessary, actions to take when an organization provides a QSEHRA.
Three items need to be addressed:
- What will your contribution amounts look like? As of today, the IRS allows organizations to provide $6,150 each year to a single employee and $12,450 each year to an employee plus their family. QSEHRA annual limits will increase in 2025 to $6,350 for employee and $12,800 for employee plus family.
- Which types of employees qualify? Legally, every full-time employee needs to qualify for the QSEHRA plan and take part, but other employees, such as those who are part-time or seasonal, may be excluded.
- What will your written notice consist of? A written notice must be provided to all employees at least 90 days prior to the QSEHRA plan year beginning, providing them with information on the QSEHRA. This must also be given to new staff members within their first day of employment (the 90 day rule is waived in this scenario).
WHAT ARE THE BENEFITS OF A PARTNERSHIP WITH FLYTE HCM?
Flyte HCM supports companies in their administration of plans and simplifies the process. Flyte is the administrative partner that advises on QSEHRA plan design, produces the documents, and adjudicates the eligible medical expenses and premiums so clients can give their full attention to the businesses they run.
INTERESTED?
Would you like to learn more about adding a QSEHRA plan and the benefits it can bring to your organization and staff members?
We would love to address any questions or concerns you may have and help you to get started. Please reach out to us so we can begin a conversation and help meet all of your needs.
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