The success of small business owners is important to us, and it is imperative to understand the challenges that nearly a quarter of small businesses face. It’s the trend we continue to see for business owners of all sizes – wanting to provide health care and health care benefits to employees while saving money and keeping the business profitable.
The Qualified Small Employer Health Reimbursement Arrangement (QSE HRA) was established and signed into law in 2017 as a part of the 21st Century Cures Act. This type of HRA makes it much easier for small business owners to offer an attractive benefits package to their employees. It is a great alternative to traditional group health insurance because employers can set their own budget and provide a formal health benefit to all of their employees without having to provide health insurance.
How does it work?
- The small business sets a monthly allowance. This is the maximum amount of tax-free money the employee will receive for their health care. For 2020, self-only coverage can receive up to $5,250 and family coverage can receive up to $10,600.
- Notifications and Attestation. The employer provides a 90 day notification before the start of the plan and an attestation form to serve as proof of Minimum Essential Coverage (MEC).
- Employees make their purchases. Employees can purchase individual health insurance or use the money for co-pays, deductibles, prescription drugs, dental, and vision, among other out-of-pocket medical expenses.
- Employees submit proof of their expense. After incurring the expense, the employee will submit proof, as defined in Code Section 213(d), to the business through receipts or an explanation of benefits from their insurance company along with affirmation of MEC before each reimbursement is made.
- Expenses are substantiated and employee is reimbursed. If it is a qualified expense, the expense is reimbursed.
To offer a QSE HRA, a business must have fewer than 50 full-time employees and not offer group insurance, including health, dental, or vision. It must be offered to all W-2 employees and those employees must provide proof of Minimum Essential Coverage (MEC).
Stacey Davis, a BASE® Sales Representative, works with a lot of clients who have found the QSE HRA to be a good fit for their benefit strategy. “A lot of business owners cannot afford to provide group health insurance, but they can provide a benefit that their employees can use to pay for their health insurance premiums and out-of-pocket medical expenses. It is a great tool that can help to either keep current employees, help entice new employees, or just assist them with their medical expenses. Instead of offering bonuses and pay raises, which are taxable to the employees, employers can offer their employees a benefit that is tax-free and 100% tax deductible to the business.”
Both the employer and employees will reap the benefits of the QSE HRA. Among other benefits, the employer can save the business money and have peace of mind knowing that all legal and administrative concerns are taken care of by BASE®. The employees now have additional money to help with the rising cost of health care and can secure their own medical insurance that fits their needs on or off the Marketplace while getting the added benefits.
The QSE HRA has been successful for all types of small businesses in offering employee health benefits. In years to come, businesses are expected to offer HRAs, like the QSE HRA, and increase the value they provide to employees. For more information on the BASE® QSE HRA, call BASE® at 1-888-386-9680.