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Small Employers Can Ring In The New Year With A Brand New Health Reimbursement Arrangement Benefit

Wesley Covert
01.30.2017

On December 13, 2016, the 21st Century Cures Act (the Act) was signed into law. It allows small employers to offer stand-alone qualified small employer health reimbursement arrangements (QSEHRAs) to employees who have purchased a health plan in the individual market. The Act overrides, in part, prior 2013 guidance from the Internal Revenue Service (IRS), which prevented employers from offering such stand-alone arrangements to employees. Beginning January 1, 2017, small employers (i.e., employers with less than fifty full-time employees during the calendar year not subject to the Affordable Care Act’s (ACA) employer shared-responsibility mandate) may provide a QSEHRA to its employees. A QSEHRA is exempt from many of the ACA’s market reforms, so long as the QSEHRA meets the following requirements: (1) the QSEHRA is 100% employer-funded, meaning that no employee salary reductions are permitted; (2) the employer does not offer a group health plan to any employees; (3) reimbursements may only be used for qualified medical expenses; (4) pre-tax treatment of reimbursements is subject to the employee providing proof of maintaining other health coverage; (5) the benefits are offered to eligible employees on an equitable basis; (6) annual QSEHRA benefits do not exceed a maximum of $4,950 for an individual, or $10,000 if family members are covered (adjusted annually); and (7) an annual notice is sent to employees which meets specific content requirements. The QSEHRA is also exempt from COBRA continuation rules. For additional information and assistance creating a QSEHRA, please contact your benefits attorney.

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