Employee Benefits Question of the Week: Employer Health Insurance Stipends

QUESTION: Can an employer with under 50 employees offer a stipend for employees to use to purchase their own individual health insurance policies?

ANSWER:  Yes, in the form of a specifically designed arrangement know as a qualified small employer health reimbursement arrangement (QSEHRA). Created in December 2016 as part of the 21st Century Cures Act, QSEHRA allows small employers to set aside a fixed amount of money each month that employees can use to purchase individual health insurance, tax-free.

An eligible employer:

  • Is not an applicable large employer
  • Does not offer a group health plan to its employees.

A QSEHRA is an arrangement that meets the following criteria:

  • Is funded solely by an eligible employer, and no salary reduction contributions may be made
  • Is provided on the same terms to all eligible employees of the employer
  • Provides, after the employee provides proof of coverage, for the payment or reimbursement of medical expenses incurred by the employee or the employee’s family members
  • In 2019, the maximum dollar amount for employee-only arrangements is $5,150, and the maximum dollar amount for family coverage arrangements is $10,450.

Resources:

IRS Revenue Procedure 2018-57, 2019 Inflation Adjustments (See section 62 on pages 29-30) and IRS Notice 2017-67, Qualified Small Employer Health Reimbursement Arrangements

 

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