Allowable as of January 1, 2017, under the 21st Century Cures Act (enacted in December 2016). Considered a “Standalone HRA” which hasn’t been allowable since 1/1/14 under the ACA. While the Plan is subject to the general provisions of ERISA applicable to welfare benefit plans (including the Plan document and SPD requirement), it is not a “group health plan” for the purposes of the Code, ERISA, COBRA, HIPAA and the ACA.

  • Who is eligible for the new QSEHRA?
    • Small Employer – Employers with less than 50 full-time employees
    • No Health Plan – The Employer must not offer a group health plan to any of its employees.
    • Eligible Employees – All full-time employees must be eligible for the plan.
  • What are the benefits of a QSEHRA?
    • The QSEHRA can provide reimbursement for individual health insurance policy premiums as well as out-of-pocket medical expenses (same expenses as FSA eligible). Medicare premiums may also be reimbursed; however, it’s unclear how the Medicare Secondary Payer Rules will affect reimbursements for Medicare premiums for employers with over 20 employees.
  • What are maximum reimbursement levels under QSEHRA starting 1/1/18?
    • $5,050 for employee only coverage or
    • $10,2500 for family coverage
    • Amounts are prorated for partial year coverage and indexed for future years.
  • Are carryovers allowable?
    • It doesn’t appear that a QSEHRA is prevented from having a carryover. However, there is a rule that not more than the limits above (adjusted for future cost of living adjustments) can be reimbursed for the year. If the employer funded a smaller amount and allowed for a carryover, that could potentially work.
  • Can amounts be accrued on a monthly basis vs. a flat annual allocation?
    • There doesn’t appear to be anything in the QSEHRA legislation and guidance which would prevent the employer from crediting/making available the annual allocation on a pro rata installment basis.  In other words, same rules as traditional HRA.
  • What are Employer requirements?
    • A QSEHRA must be offered to all eligible employees on the same terms.
  • What employees can be excluded?
    • Less than 90 days of service with the company
    • Under age 25
    • Part-time or seasonal employee
    • Union employees
  • Can an Employer exclude an employee who is covered under a spouse’s employer’s group medical plan?
    • A QSEHRA allows for a broad definition of eligible expenses for reimbursement purposes, but permits an employer from designing its plan to use a smaller subset. It doesn’t appear that an employer would be prohibited from adding this type of restriction. However, it must be done on a uniform basis for all similarly situated employees.
  • What are Employee requirements?
    • Employees must maintain minimal essential coverage under an individual policy (directly through a carrier or through Exchange)
  • Would the QSEHRA preclude covered employees from receiving a subsidy on the Exchange?
    • The QSEHRA benefit doesn’t preclude premium tax credit eligibility.  However, it operates as an offset to reduce the amount of the premium tax credit (no subsidy is likely)
  • What are written notice requirements by Employer?
    • 90 days prior to beginning the Plan Year
    • Spells out the amount of benefit available for upcoming Plan Year
    • Employee is required to notify the Exchange of the QSEHRA if they apply for a subsidy
    • Tax consequences of not having minimal essential coverage
  • Are there any other Employer requirements?
    • Employer must obtain “proof of coverage” before reimbursing any expenses
    • Available QSEHRA benefits must be reported on the employee’s W-2 in new Box 12 (not taxable in Box 1 of W-2)
    • QSEHRA is exempt from COBRA
    • Plan document and SPD are required (SBC is not required)

Questions? Contact Arcadia Benefits Group!