Qualified small employer health reimbursement arrangement (QSEHRA).

A QSEHRA is limited to employers with fewer than 50 full-time-equivalent employees that do not offer a group health plan, and it follows annual IRS contribution limits. An ICHRA has no employer-size restriction, no contribution cap, and lets employers vary allowances by employee class. ICHRA suits larger and multi-state workforces, while QSEHRA suits very small businesses.

An eligible employee enrolls in their own ACA-compliant individual health insurance plan, then submits proof of coverage and qualified medical expenses to a third-party administrator. Approved expenses are reimbursed tax-free through payroll up to the QSEHRA’s monthly allowance. Unused allowance can roll forward each month within the plan year.

Employees must enroll in minimum essential coverage to receive QSEHRA reimbursements tax-free. ACA Marketplace plans, off-Marketplace individual major medical plans, a spouse’s group plan, and Medicare all qualify. Short-term medical plans, faith-based sharing programs, and other limited-benefit products do not satisfy the requirement.

Federal law requires the employer to give every eligible employee a written QSEHRA notice at least 90 days before the start of the plan year, and within 90 days of the eligibility date for new hires. The notice describes the allowance and the impact on premium tax credits. Late notices trigger an IRS penalty.

Yes, QSEHRA contributions are tax-deductible to the employer and tax-free to the employee on qualified expenses. The structure delivers more buying power than an equivalent post-tax stipend because the employee receives the full allowance without payroll or income tax withholding.

No, a business cannot offer a QSEHRA and a traditional group health plan to any class of employees at the same time. Employers that already sponsor a group plan must drop the group plan before launching a QSEHRA. Employers that want to offer both reimbursement-style and group coverage at once should evaluate ICHRA instead.

Yes, employers can offer different QSEHRA amounts for self-only and family coverage, and many programs vary the allowance by age. The variation must apply uniformly across all eligible employees within the plan, so an age-based or family-size schedule applies to every worker who meets the criteria.

Unused QSEHRA allowance can roll forward from month to month within the same plan year, so employees can save up the benefit for a larger expense like a deductible or year-end procedure. Allowance does not roll over to the next plan year, and any unused balance reverts to the employer at the end of the plan year.

YourMedPlan partners with a vetted third-party administrator to handle plan documents, reimbursement processing, and IRS-compliant employee notices. Licensed advisors meet with each employee one-on-one to recommend an ACA-compliant individual plan that matches their needs and confirm the right tax credit decision before enrollment.

A business can launch a QSEHRA at any time of year, though most employers sync the plan year with the calendar year so employees can enroll in individual coverage during the ACA Open Enrollment Period. Mid-year launches require the QSEHRA notice to go out at least 90 days before the effective date and a Special Enrollment Period for employees needing new coverage.

Employers must report the value of each employee’s QSEHRA permitted benefit on the W-2 in Box 12 with code FF. Most employers also retain plan documents, eligibility certifications, and substantiated reimbursement records for IRS audit purposes.

When an employee separates from the company, QSEHRA reimbursements stop on the termination date and the employee’s final reimbursement covers eligible expenses incurred while still employed. The employee keeps their individual health insurance plan, and the employer is not required to offer COBRA-style continuation under a QSEHRA.