Small employers now have the ability to assist employees with the cost of health care through a qualified small employer health reimbursement arrangement (QSEHRA). Prior to the Affordable Care Act (ACA), small employers were able to offer stand-alone health reimbursement arrangements (HRAs) to help employees pay for medical care expenses, including health insurance premiums, on a tax-free basis. This changed with the passage of the ACA, under which stand-alone HRAs were generally considered group health plans that violated the ACA’s annual dollar limit prohibition (some stand-alone HRAs, such as retiree-only HRAs, remained valid). Consequently, employers who continued to offer such arrangements could face fines of up to $36,500 per employee per year (with a $500,000 total limit). With the passage of the 21st Century Cures Act, which incorporates key components of the Small Business Healthcare Relief Act, small employers may again offer this benefit to employees.
Eligible Employers To be eligible to offer a QSEHRA, an employer (1) cannot be an “applicable large employer” under the ACA, i.e., had fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, and (2) cannot offer a group health plan to any of its employees. Qualified employers must offer the Continue reading