New Law Eases Health Care Burdens for Small Businesses
Allows Health Reimbursement Benefits Without Having to Install a Group Health Plan
Thanks to a recently enacted provision in the 21st Century Cures Act, companies are now allowed to use Health Reimbursement Arrangements (HRAs) to compensate employees who buy their own insurance. This new law is especially good news for small and mid-size businesses who cannot afford to offer health insurance to their employees – the new HRA may be offered as an alternative. Businesses who offer health insurance but are facing huge increases may also find relief in the new law.
The new health reimbursement arrangement vehicle, called Qualified Small Employer Health Reimbursement Arrangements (QSEHRA), is available to employers that are not subject to the Affordable Care Act (ACA). In other words, only employers that have less than 50 full-time equivalent employees are eligible to qualify for the new HRA allowance.
There are some other conditions for this new benefit: the company cannot offer a separate group health plan, and it must make the reimbursement available on the same terms to all employees, although it can vary the amount of the reimbursement based on the employee’s age and family size. The maximum reimbursement employers can provide under the plan is $4,950 for individual insurance, and $10,000 for a family plan.
How it Works
Only employers with less than 50 full-time employees are eligible to offer the new HRA (QSEHRA) plan. Companies who want to establish a QSEHRA cannot offer both a separate group health plan and a QSEHRA or allow employee contributions to go toward the plan.
If you are looking to start an HRA for your small business, be aware that your company must be in compliance with all federal regulatory measures. They include verifying that employees have health insurance before issuing any reimbursements from the HRA, providing written notices to employees, and reporting amounts on the employees’ W-2s. For a detailed requirements document, request our free sample HRA notice template and qualified small employer basics fact sheet below.
How CPS can help
Complete Payroll Solutions can immediately support and administer the new HRA for small businesses. We help you determine your contribution amount, develop official plan documents, provide all employee notices, establish claims processing and ensure the plan is in full compliance.
Please let us know if you have any questions or if you are interested in offering the new QSEHRA benefit to your employees.
You may also be interested in our sample HRA notice template and qualified small employer HRA basics fact sheet that contains detailed QSEHRA information and an example employee notice document. To learn more, visit here.