Qualified Small Employer HRA
Introduced in 2017, the Qualified Small Employer HRA (QSEHRA) allows small employers who do not offer a Group Health Plan to provide funds to employees to purchase individual health insurance coverage and provide reimbursement for 213(d) qualified expenses. Introduced in 2020, the Individual Coverage HRA is available to all employers and has fewer restrictions.
Eligibility
Employers
An Employer must meet all the following:
- The Employer cannot be an Applicable Large Employer (ALE). This typically means that an Employer must have fewer than 50 full time employees.
- The Employer cannot offer a Group Health Plan to any employees.
Participants
- Benefits are tax-free only if covered by a plan with minimum essential coverage (MEC).
- To be eligible, the employee cannot be offered a Group Health Plan.
Who Can Contribute
Only the Employer can contribute to a QSEHRA.
Advantages of a QSEHRA
Employers
- Employers save on premiums by not offering a Group Health Plan.
Participants
- Employees receive tax-free reimbursement to purchase individual coverage or pay for 213(d) qualified expenses.
Versus Individual Coverage HRA
A QSEHRA is similar to an Individual Coverage HRA (ICHRA). Below are the key differences.
ICHRA
QSEHRA
Premium reimbursement
✓
✓
213(d) medical expense reimbursement (optional)
✓
✓
Available to Employers of all sizes
✓
X.
Subject to contribution limits
X
✓
Employees may opt out to receive full premium tax credit
✓
X
How it Works
For Employers
The Employer defines the terms of the QSEHRA and enrolls new employees.
QSHRA funds are available to employees on the first day of the Plan Year.
EMPOWER administers the QSEHRA and issues reimbursements to employees to purchase coverage or pay for qualified medical expenses.
For Participants
Employees are typically automatically enrolled in the QSEHRA.
Participants purchase individual coverage or pay for medical expenses with their own form of payment.
Participants file claims to EMPOWER with a receipt for coverage or service. EMPOWER reimburses claims conveniently from the Employer’s bank account.
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