As more employers look for creative ways to provide meaningful health benefits without the complexity or cost of traditional group insurance, the Qualified Small Employer Health Reimbursement Arrangement, or QSEHRA plan, is getting renewed attention—and for good reason.

Many employers start out offering a taxable stipend—a flat-dollar health allowance added to employee paychecks. But that approach creates tax consequences for both the employer and the employee and often doesn’t feel like a true benefit. With QSEHRA, those same dollars can be delivered tax-free, giving employees more value and helping employers control costs—all within a compliant benefit structure.

What Is a QSEHRA Plan?

A QSEHRA plan allows employers with fewer than 50 full-time equivalent employees to reimburse their team for qualified medical expenses and individual insurance premiums—tax-free.

  • Employers set the budget—contributions are capped annually ($6,350 individual / $12,800 family for 2025)
  • Employees choose their insurance—individual policies, Medicare, and even group coverage through a spouse or parent qualify, as long as they have Minimum Essential Coverage (MEC)
  • Reimbursements are tax-free for both employer and employee (with MEC in place)

QSEHRA is more than just a health benefit—it’s a flexible, tax-free reimbursement plan available to all employees, regardless of how they’re insured. Their coverage must meet Minimum Essential Coverage requirements for employees to participate and receive reimbursements.

Insurance coverage in QSEHRA could include a spouse’s or parent’s plan, a government program like Medicare, Medicaid, or Tricare, COBRA, or even an individual health insurance policy—with or without a premium tax credit. With MEC in place, employees can be reimbursed for a wide range of qualified medical expenses, all on a tax-free basis.

Who Is Eligible for QSEHRA?

All employees are automatically eligible for QSEHRA, regardless of how they are insured. However, employers may choose to exclude certain allowable classes of employees from participation, including:

  • Employees who have not completed 90 days of service
  • Employees under age 25
  • Part-time employees (typically working fewer than 30 hours per week)
  • Seasonal employees
  • Employees covered by a collective bargaining agreement (if health benefits were part of good-faith bargaining)
  • Non-resident aliens with no U.S.-based income

If an employer chooses to exclude a class, all employees in that class must be excluded uniformly.

It’s important to note that while all included employees are enrolled in the QSEHRA by default, they must attest that they have Minimum Essential Coverage and submit an eligible expense to receive tax-free reimbursement. This ensures that the benefit is used compliantly and only by those with qualifying coverage.

QSEHRA Flexible Start Date & Special Enrollment Period

One of the most convenient aspects of QSEHRA is that it can be started at any time during the year—you don’t have to wait for open enrollment.

And if an employee doesn’t currently have insurance, the implementation of a QSEHRA creates a Special Enrollment Period (SEP), allowing them to sign up for individual coverage outside of the typical open enrollment window. This is a major advantage for employers who want to offer immediate value and flexibility.

A More Inclusive Health Benefit

One of the best parts of QSEHRA is its inclusivity. It works for all full-time employees, regardless of how they’re currently insured—so long as they have MEC. The tax-free reimbursements can go far beyond health insurance premiums.

Eligible expenses include:

  • Copays and deductibles
  • Prescription medications
  • Individual dental and vision premiums
  • Dental care and orthodontics
  • Vision exams and glasses

A Quick QSEHRA Plan Example

Let’s say John is covered under his wife’s group health plan and has a $1,500 deductible. His employer offers a QSEHRA with a $250/month reimbursement limit. Even though John doesn’t have his own insurance policy, he still qualifies to receive tax-free reimbursements for out-of-pocket costs—if his wife’s plan meets MEC requirements.

How Flyte HCM Makes QSEHRA Easy

At Flyte, we take care of the behind-the-scenes complexity so you can focus on your team:

  • Simple Setup – We help design your plan, notify employees, and track contribution limits
  • Dedicated Member Services – Real people, ready to help your employees understand their benefits and get reimbursed
  • Compliance & Claim Review – We review every claim to ensure it meets IRS substantiation requirements
  • Modern Technology – Our Flyte Benefits Mobile App and online Flyte Health Account Manager platform make it easy to:
    • Submit claims with their billing images
    • Track account activity
    • Scan eligible expenses
    • Manage reimbursements from anywhere

Filing a claim takes just a few taps—employees select “Reimburse Myself,” enter details, upload a photo, and submit.

With Flyte as your QSEHRA partner, you stay in compliance without the stress. We manage:

  • MEC attestations
  • IRS substantiation of all reimbursed expenses
  • Special reports for W-2 reporting (Box 12, Code FF)
  • Required legal documents: QSEHRA Plan Document and Summary Plan Description (SPD)
  • Facilitation of reimbursements: We ensure that once claims are approved, employees receive their funds quickly and directly to their bank account

Whether you’re transitioning from a taxable stipend or starting fresh, Flyte HCM makes setup simple, compliance easy, and the experience better for everyone involved. Contact us today so we can show you how QSEHRA can work for your business.