In order to ease the cost of the ACA for small businesses, Congress recently passed the 21st Century Care Act. This law gives small employers who don’t offer group health insurance the chance to establish a standalone HRA (Health Reimbursement Account). These new HRA’s are called “qualified small employer HRA’s” or QSEHRA’s. QSEHRA’s provide an option for small business owners struggling with the cost of health premiums. Now, an employer can stay competitive without needing to offer group insurance. Here’s how: employers who don’t offer group health insurance and who employ less than 50 full-time employees can reimburse their employees for out-of-pocket medical expenses (including premiums) on a tax free basis using a QSEHRA.
What are the limitations? First, employers must fund the entirety of these QSEHRA’s. As a result, employees aren’t able to contribute to their QSEHRA. Also, employees must enroll in individual plans that meet ACA requirements for minimum essential coverage. Further, the law set contribution caps for funds sent to the QSEHRA. For individuals, this cap is $4,950. For employees who use their QSEHRA to cover medical expenses for family members, the cap is $10,000. In addition, employers must offer the QSEHRA to all employees on the same terms. However, the maximum benefit for employees can vary. Finally, employers must prorate contributions to the QSEHRA for employees who have not been employed for the full year.
The insurance industry is constantly changing, and we know how confusing and complex the process can be. As as result of our experience, Morgan Planning Group knows how best to help our clients maximize their benefits package. If you think that QSEHRA’s might be the right choice for your business, please feel free to contact us at info@morganplan.com or at 800-484-2199. We’d be happy to give you more information and assistance.
Benefits at a glance:
-QSEHRA’s are now available as an option for small employers without a group health plan.
-Allows employers to contribute funds into HRA’s for their employees to help pay for eligible out-of-pocket medical expenses.
-Expenses can include the cost of premium.
-Employers contribute to QSEHRA’s on a tax-free basis.