![]() ![]() ![]() Like other HRAs, QSEHRAs reimburse employees, tax-free, for their medical expenses, including individual health insurance premiums up to a set contributed allowance amount. Qualified small employer HRA (QSEHRA)Ī QSEHRA is for small employers with fewer than 50 full-time equivalent employees (FTEs). You can boost your compensation package with the HRAs in the following sections. We handle the legal documents and compliance requirements while you reimburse employees for their approved expenses. With an HRA administration software provider like PeopleKeep, you can administer a health benefit to your employees in just minutes every month. HRAs can be a medical reimbursement tool for Medicare healthcare premiums, but there are conditions for each type of HRA, so be sure to read the regulations carefully.įor example, some HRAs require employees to have individual health insurance policies, while others only work with group health insurance plans. If you have current employees on Medicare, then you’re in luck. Employer reimbursements are made monthly up to the employees’ allowance amount, typically through their paycheck with pre-tax dollars. With an HRA, employees purchase their own health plan coverage through a health insurance exchange, like the federal Marketplace, a state-based exchange, or directly from a health insurance company. Also, any unused allowance at the end of the plan year stays with you, even if your employee quits or retires. Only employer contributions are allowed-employee contributions to an HRA aren’t permitted. Unlike a stipend, business owners don’t pay anything until an employee submits proof of the incurred healthcare expenses with a receipt or invoice. ![]() ![]() With a formal, tax-free HRA, you set a fixed allowance for your eligible employees to use to pay for their health insurance premiums and other medical care expenses referenced in IRS Publication 502. How does a tax-free HRA work?Īnother alternative to a standard health insurance plan is an HRA. Business owners must pay payroll tax, and employees must claim the stipend as taxable income on their tax return.Īdditionally, employees don’t need to prove that they are using a stipend to purchase individual health insurance coverage or medical expenses, so there isn’t any accountability for how the money is spent. One drawback with stipends is that they come with taxes. However, stipends increase employees’ annual household income, which may affect their premium tax credit size. Stipends can be particularly helpful if you have a lot of employees that qualify for premium tax credits, as stipends don’t affect premium tax credit eligibility. Employer contributions are typically added to employees' paychecks or given as a separate check. Stipends have their perks, such as being easier to administer since they’re not subject to as many compliance requirements as most traditional group health plans. With a taxable stipend, employees receive a fixed, taxable amount of money to help cover the cost of their health insurance and other medical expenses. Learn more about health reimbursement arrangements in our guide How does a taxable stipend work? This article will cover taxable stipends and HRAs and how these two coverage options can work for your organization. However, there are guidelines for both that employers must follow to reimburse their employees compliantly. Luckily, there are options that allow you to reimburse employees for individual health insurance coverage, such as a taxable stipend or a health reimbursement arrangement (HRA). As you think through the costs and features of your employee benefits package, you may wonder if you can reimburse your employees for health insurance. ![]()
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