Redpath Insights

New HRA Option for Small Employers

by Christine Bentson, CPA, RPA, CEBS

President Obama signed new legislation on December 13, 2016 allowing small employers (those employers with fewer than 50 full-time employees with no group health plan) the ability to offer their employees a stand-alone health reimbursement arrangement (HRA) called a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). Medical expenses, including health insurance premiums, will be able to be reimbursed by the employer through the QSEHRA. It will be available for years beginning after December 31, 2016, however certain requirements must be met in order for an employer to offer this new type of HRA.

Requirements for providing a Qualified Small Employee Health Reimbursement Arrangement

  • Can only be offered by employers that do not offer a group health plan and are not “applicable large employers” (employers with 50 or more full-time employees)
  • Must be funded solely by the employer; no employee salary reductions
  • Same plan terms must apply to all eligible employees
  • Benefit amounts cannot exceed $4,950 per year; $10,000 if family members are covered
  • Must give annual notice at least 90 days before plan year start, 90 days before employees initial eligibility date, or 90 days after legislation enactment whichever is later
  • Employee provides proof of minimum essential individual or non-group insurance coverage as defined by the Affordable Care Act

This new legislation:

  • Allows small employers (that are not subject to the employer shared responsibility provisions of health care reform) the ability to provide something to employees without incurring the cost of providing a group health insurance plan.
  • Now allows stand-alone HRA’s (which were previously in violation of the ACA market reforms).
  • Could affect the employees premium subsidies through the marketplace.
  • Still prohibits the use of this arrangement for large employers.
  • Allows a tax-free benefit to employees for each month they have minimum essential coverage.

For more information, please contact Christine Bentson, CPA, RPA CEBS, at 651-407-5808 or cbentson@redpathcpas.com

Christine Bentson, CPA, RPA, CEBS

Christine Bentson, CPA, RPA, CEBS

Christine Bentson, employee benefits service area leader is a CPA, retirement plan associate, and certified employee benefit specialist. She specializes in establishing, designing and administering employee benefit and retirement planning services for closely-held business clients, as well as preparation of government reporting for welfare benefit plans. Christine has provided public accounting services at Redpath and Company since 1987.