What precisely is entailed in setting up a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)? Diving into novel healthcare possibilities might feel daunting for some. Trust us when we say, it’s simpler than you may anticipate. See below for the rules and prerequisites of QSEHRA establishment to discover how you can have your QSEHRA ready by the day’s end!
Setting up QSEHRA
If your company qualifies for a QSEHRA, the setup process is quite straightforward. Most businesses choose to utilize QSEHRA management software to save time, but it is feasible to handle it in-house with a QSEHRA administrator. With the increasing popularity of QSEHRAs, you certainly do not want to miss out!
How to establish a QSEHRA
Not sure where to begin? Follow these seven steps and you will be enrolled and processing reimbursements in no time.
- Select your commencement date. The first step is to pick your start date! If you do not have an existing group plan that needs to be terminated, you can set your QSEHRA in motion immediately. Otherwise, you will need to choose a start date after your current plan is terminated.
- Terminate your group plan (if applicable). If your company currently provides a group healthcare plan, it will need to be terminated. To ensure your employees do not experience any gaps in coverage, select a termination date that is no more than a day before your new plan commences.
- Verify employee eligibility. QSEHRA requires equitable treatment for all your employees. This means the plan must be offered to all full-time employees. Offering it to part-time employees is optional.
- Determine your financial plan. You must establish your budget and decide how much you will offer your employees for their reimbursed expenses. When doing so, you can vary the reimbursement amounts based on categories, age, and family size. There is no minimum contribution required from your end to be eligible for QSEHRA participation, but refer to the 2024 contribution limits for specifics.
- Establish QSEHRA plan documents. QSEHRAs are regulated by the IRS, and there are several legal documents that must be completed before you can officially begin. Your documentation needs to include your HRA policies, such as your monthly reimbursement amounts and employee eligibility. For more detailed information about QSEHRA plan documents, check out this useful article.
- Introduce employees to their new plan. One of the major advantages of participating in a QSEHRA is the support and flexibility it offers your employees. Make it as easy and rewarding as possible for them by ensuring they know how to use their new policy! During the onboarding process, they should be informed about start dates, annual HRA allowances, and how to obtain coverage. For further guidance on effective QSEHRA employee notice suggestions, read this article.
- Provide resources to employees. Now that your employees are enrolled in your QSEHRA, you can assist them by guiding them in selecting the most suitable individual healthcare plan that aligns with their needs. While you cannot participate in their decision-making process, you can offer them resources to aid them in making an informed decision.
→ Check out this post on how to communicate a QSEHRA benefit to your employees
To save you time, effort, and potential confusion during the setup stage of your QSEHRA, experts at Take Command are available to assist you from start to finish.
An often-asked question is whether QSEHRAs can be managed internally. The answer is…somewhat. Nonetheless, we advise against it for several reasons.
- Confidentiality. The nature of a QSEHRA entails frequent handling of personal employee data. Each month, employees submit their medical information for themselves and their family members. As their employer, you are not legally authorized to access that information. To safeguard the privacy of your employees, you would need to appoint an account administrator to oversee employee accounts, reimbursement requests, and other confidential information.
- Documentation. Keeping up with the paperwork involved in maintaining a compliant QSEHRA is a full-time job in itself. Not only do all records need to be securely stored, but the IRS mandates that all records be securely stored for up to seven years. This involves all receipts, reimbursement requests, approvals, payments, and other confidential information. Managing all the documentation alongside running a business is sufficient reason to consider QSEHRA management software like Take Command.
- Adherence. If the privacy and paperwork were not enough to manage, companies that self-administer their QSEHRAs also need to ensure compliance with HIPAA regulations. The Health Insurance Portability and Accountability Act of 1996 safeguards all patient medical information. Failing to comply with HIPAA laws carries penalties ranging from $100 to $250,000 and up to ten years in prison.
Ready to see how QSEHRA management software can help alleviate some stress?
2024 QSEHRA limitations
New year, new contribution directives! The IRS has recently announced its 2024 QSEHRA limitations. According to QSEHRA requirements, there are no minimums for reimbursements. However, these annually adjusted limitations outline the maximum amounts that small businesses are permitted to reimburse.
The 2024 QSEHRA limitations stipulate that businesses with fewer than 50 employees can contribute a maximum of $6,150 for individual employees and $12,450 for employees with a family.
QSEHRA employee prerequisites
An employer is eligible to participate in a QSEHRA plan as long as they have fewer than 50 employees and do not offer a group health care plan. As long as an employer is eligible to participate in a QSEHRA plan, each employee may strive to qualify to participate. However, the IRS permits businesses to make exceptions based on several distinctions. A business is allowed to disallow employees from participating in the QSEHRA plan if:
- The employee is a part-time worker
- The employee is a seasonal worker
- The employee is younger than 25 years old
- The employee has been with the employer for less than 90 days
- The employee is part of a union (unless the union agreement provides for eligibility)
- The employee is a non-resident alien and does not receive income from U.S. sources
Are you prepared to gain a better comprehension of the QSEHRA employee prerequisites and commence the setup of your QSEHRA plan?
QSEHRA qualified expenses
As part of the onboarding process, it is crucial to ensure that your employees (and you!) grasp the advantages of participating in your company’s QSEHRA. Sharing information about QSEHRA-qualified expenses is certain to excite everyone about their new plan.
Annually, the IRS publishes an updated list of expenses eligible for reimbursement by their employer. The list for 2024 includes:
- Medical diagnoses, cures, treatments, and preventions
- Personal care products
- Health insurance premiums
- Qualified long-term care services
- And many more
By familiarizing your employees with all potential eligible expenses, they can fully maximize QSEHRA reimbursements.
Remember that not onlyThe staff members have the ability to utilize pre-taxed funds for eligible medical expenses. As the employer, you can significantly reduce costs every month by avoiding group health care plans. It’s a win-win situation all around!
Requirements for QSEHRA
While QSEHRAs offer considerable flexibility, there are several requirements to consider if you are contemplating enrolling your business.
- Your company must employ fewer than 50 full-time workers.
- While participating in a QSEHRA, you must abstain from sponsoring a group health care plan.
- You should not promote a specific health care policy or carrier.
For instance, a small church with less than 10 staff members seeking cost-effective church health insurance.
It’s quite straightforward, isn’t it?
Once your plan is established and ready for implementation, there are a few more QSEHRA requirements to bear in mind.
- Established Reimbursement Amounts. Though there are no minimum reimbursement thresholds, the IRS defines maximum annual reimbursement amounts per employee.
- Equitable Employee Participation. Employers can offer varying reimbursement amounts to members of different categories (based on age, family size, etc.). Nevertheless, members of the same category must be offered identical reimbursement amounts.
- Provision of Written Notices to Employees. Employees should receive written notice 90 days before the commencement of each new year if the employer plans to participate in a QSEHRA.
- Verification of Minimum Essential Coverage. Employees can commence submitting expenses for reimbursement once they have furnished evidence that their individual health insurance complies with Minimum Essential Coverage (MEC) standards.
- Submission of Substantiated Medical Expenses. Employees also need to present evidence of medical expenses when requesting reimbursement.
- All reimbursements must be recorded. The IRS mandates that QSEHRA reimbursement limits be reflected on employees’ W2s.
Remember, QSEHRA requirements are established and monitored by the IRS. If you feel that you may require a third party to assist in administering these requirements, don’t hesitate to contact Take Command Health QSEHRA experts. They’ll take care of all your administration needs–onboarding, legal compliance, reimbursement requests, and all tax maintenance throughout the year!