What is a QSE-HRA? - Paper Trails

There are many different types of health insurance plans businesses can offer to their employees.  These plans are a great benefit to add for your employees, ultimately leading to higher employee retention rates.  In this article, we will focus on one specific type of health insurance plan for small businesses.  Let’s take a look at what a QSE-HRA is.

What is a QSE-HRA?

A Qualified Small Employer Health Reimbursement Arrangement (QSE-HRA) is an option for businesses under 50 employees that do not offer a group health insurance plan to their employees.   This type of Health Reimbursement Arrangement (HRA) uses tax-free dollars to reimburse employees who purchase individual health insurance on the marketplace or the ACA exchange, along with eligible out-of-pocket benefits.

Qualifying medical expenses include:

• Insurance premiums (health, dental, vision, etc.)
• Coinsurance
• Deductibles
• Copays
• Prescription drugs
• Over-the-counter drugs

Which employers are eligible to offer a QSE-HRA?

Only non-applicable large employers (ALEs) are eligible to sponsor a QSE-HRA.  This means the business must have less than 50 full-time employees, and common ownership rules do apply.  The employer, and any commonly controlled businesses are not allowed to offer any other group health plan to their employees if they have a QSE-HRA in place.

Which employees are eligible to participate in the plan?

Any employee of an eligible employer may qualify to partake in a QSE-HRA with a few exceptions.  These exceptions allow employers to exclude:

• Part-time or seasonal workers
• Employees who are younger than 25
• Those who have not been with the employer for at least 90 days
• Non-resident aliens
• Employees covered under a collective bargaining agreement

What are other details of this type of plan?

Some other details of a QSE-HRA include:

• Employees with minimum essential health coverage submit qualified medical expenses and supporting documentation to their employer, who then reimburses them with tax-free money up to a maximum amount.
• Only an employer can contribute to the QSE-HRA.  Employee contributions are not allowed.
• The annual amount that can be contributed by an employer to the Plan is $5,850 per employee electing individual coverage and $11,800 per employee electing family coverage (2023, indexed annually).
• The QSE-HRA must be offered to all employees on an equal basis with few exceptions.
• QSE-HRA funds may be used by employees to pay qualifying medical expenses including health insurance premiums.
• The employer must verify that the employee has qualifying health insurance (requiring proof of coverage) before issuing any reimbursements from the QSE-HRA.
• Written notice must be provided to qualifying employees 90 days prior to the start of each plan year.

At Paper Trails, we can work to setup a QSE-HRA for your business, as well as make the proper payroll integration necessary to ensure accuracy and compliance.  Feel free to contact us for more information or if you are interested in starting a plan for your business.