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Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
Practical Law Glossary Item w-021-5296 (Approx. 3 pages)
Glossary
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
An arrangement that may be offered by small employers to provide payments or reimbursements to eligible employees for medical care expenses, as defined under Section 213(d) of the Internal Revenue Code, incurred by the employees or their family members (26 U.S.C. § 213(d)). This includes expenses for individual health insurance policy premiums. Made possible by federal legislation (the 21st Century Cures Act; Pub. L. No. 114-255, § 18001 (Dec. 13, 2016)), QSEHRAs are not subject to many requirements applicable to employer-sponsored group health plans (see Group Health Plans Toolkit).
A QSEHRA must:
- Be provided on the same terms to all a small employer's eligible employees.
- Be funded solely by an eligible employer.
- Not permit salary reduction contributions to be made under the arrangement.
Payments or reimbursements under a QSEHRA for a year are capped and adjusted annually for inflation.
An employer is eligible to fund a QSEHRA if it:
- Has fewer than 50 full-time employees, including full-time equivalents.
- Does not offer a group health plan to any of its employees (but an employer that offers a group health plan to former employees, such as retirees, may sponsor a QSEHRA).
Generally, an employer that provides a QSEHRA to eligible employees must furnish a written notice to each employee at least 90 days before the beginning of each year (26 U.S.C. § 9831(d)(4)).
To learn more about QSEHRAs, including the reporting requirements and penalties for noncompliance, see Practice Note, Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs)).