Qualified Small Employer Health Reimbursement Arrangements
Section 18001 of the 21st Century Cures Act amends the Code, ERISA, and the ACA to exempt qualified small employer health reimbursement arrangements (QSEHRAs) from certain requirements that apply to group health plans. As a result, such plans can now be offered to employees of small businesses. A QSEHRA is defined as an arrangement offered by an employer that has fewer than 50 full-time employees and that does not offer group health plans to any of their employees. In order to qualify as a QSEHRA, the arrangement must:
(1) be provided on the same terms to all eligible employees of the employer;
(2) be funded solely by the employer without salary reduction contributions;
(3) provide, after an employee provides proof of insurance coverage, for the payment or reimbursement of medical expenses of the employee and family members; and
(4) limit annual payments and reimbursements to specified dollar amounts ($4,950 per year for individuals, and $10,000 for families).
QSEHRAs that meet these requirements are not considered group health plans and are exempt from the various requirements that apply to group health plans. An arrangement does not fail to be provided on the same terms to all eligible employees merely because employees’ permitted benefits vary with the price of a health insurance policy in the individual insurance market based on the ages of the employee and family members or the number of family members covered by the arrangement, provided that the variation is determined by reference to the same insurance policy for all eligible employees.
Coverage and payments under QSEHRAs are excluded from gross income, unless the employee does not have minimum essential health insurance coverage for the month in which the medical care was provided. Employers offering a QSEHRA must notify employees in advance regarding permitted benefits. Additional information reporting is required, including the reporting of benefit information on W-2 forms.