UPDATE for June 2017. FCMM has worked with our legal counsel to provide a working document that can guide a church in implementing a QSEHRA. Download here.
UPDATE for 2018: The IRS has announced 2018 QSEHRA reimbursement limits of $5,050 per employee or $10,250 per employee family.
As of December 13, 2016, a new Qualified Small Employer Health Reimbursement Arrangement (QESHRA) has been approved, allowing employers with fewer than 50 full-time employees to reimburse (or directly pay) health insurance premiums obtained individually by employees. This form of HRA may also be used to reimburse other eligible medical expenses. The act lifts part of the ACA prohibition agains employer payment of individual premiums, but enacts signficant guidelines that limit the extent of the benefit.
QSEHRA payments are nontaxable employer-provided benefits that are not reported as employee income. (An employer, however, must report the total amount of the annual permitted benefit as information on each employee’s W-2 in Box 12 [Code FF].)
There are several qualifiers and limits, including:
- The employer must provide the HRA on the same terms to all eligible employees (with some latitude for difference in premiums for age and number of family members).
- The employer must not be offering a group health plan.
- The employer must solely fund the HRA. Salary reduction contributions are not allowed.
- The employer must require documentation of medical care expenses or proof of coverage before paying.
- The HRA amount is capped at $10,000 for families, $4,950 for single employees.
- The employer must provide a 90-day notice of the HRA program to employees before the year begins. For 2017 arrangements the notification must be given by March 13.