On January 1, 2017, the 21st Century Cures Act went into effect and enabled small businesses to implement qualified small employer health reimbursement arrangements (QSEHRAs), giving them the flexibility to set up tax-free reimbursements to help employees pay for healthcare expenses without penalties.
QSEHRAs may be provided to eligible employees (those who work 130 hours a month or 30+ hours a week for 120 consecutive days) by an eligible employer that does not offer a group health plan to any of its employees.
Plans with qualified HRAs must:
- Be provided on the same terms to all eligible employees
- Be funded solely by the employer without salary reduction contributions
- Provide payment or reimbursement for employees’ and their family members’ medical expenses only after the employee provides proof of coverage
- Limit annual payments and reimbursements to specified dollar amounts
The law caps qualified HRAs at $4,950 per single employee and $10,000 per employee with dependents. Qualified HRAs are solely employer funded, meaning employees can’t contribute.