The 21st Century Cures Act was signed into law on December 13, 2016, establishing a “Qualified Small Employer Health Reimbursement Account” (QSEHRA). Under this law, qualified small employers will be permitted to reimburse employees for insurance premiums and other qualified medical expenses defined by Section 213(d). This is welcome news for many small employers. However, there are still a number of factors to evaluate and further guidance required to fully understand the role these accounts with have in aiding employees with health care expenses .
Understanding the Basics of the QSEHRA
Qualifying Employers
The QSEHRA is limited to “qualified employers”. In order to qualify, employers may not offer a group health plan and cannot be considered an “applicable large employer” as defined in Code Sec. 4980H(c)(2). Employers are generally considered a large employer if they employ 50 or more full-time employees.
Eligible employees
The QSEHRA benefit must be offered on the same terms to all employees with limited exceptions. Employers are not required to offer the plan to part-time, seasonal or to employees in an initial eligibility period (not to exceed 90 days).
Benefit amount
The annual benefit cannot exceed $4,950 per year ($10,000 if family members are covered). Additionally, it must be provided on the same terms for all eligible employees. Variations may occur for based on age or number of covered family members. Amounts can be prorated based on the number of months the employee maintains minimum essential coverage.
Insurance coverage
Employees will be required to obtain minimum essential coverage and must provide proof of insurance prior to receiving reimbursements from the QSEHRA. Employees can be covered through individual policies, insurance exchanges or another group health plan.
Employer notification requirements
Employers will be required to provide notice to employees in advance of receiving the benefit. Employers will also be required to report the benefit on employee’s W-2.
Considerations for employees
QSEHRA benefits provided to employees will be used to determine eligibility for subsidies on the exchanges and may prevent employees from receiving premium tax credits.
With any new law, there are still a number of unknown factors. Employers wishing to take advantage of these new accounts should consult a business, insurance or tax advisor to determine if there are any special considerations or state laws which may restrict these plans. BRI will continue to provide updates and information as details unfold.
Additional Resources
- Legislative Text for 21st Century Cures Act
- FAQ About Affordable Care Act Implementation Part 35 – December 20. 2016, Department of Labor
Source: EBIA Weekly, December 16, 2016
