If you’re interested in establishing a qualified small employer health reimbursement arrangement (QSEHRA) for your company, you might feel overwhelmed as there can be a lot of new terms, concepts, and regulations to understand.
Doing this through with HRA administration software automates the hard stuff. We’ve broken the QSEHRA setup process down into eight steps that are simple to follow and easy to understand.
Interested in offering a QSEHRA with PeopleKeep? Watch a demo of our software
How to set up a qualified small employer HRA (QSEHRA)
- Pick a start date. The first step is straightforward: you need to set a start date. If your company doesn’t have any type of health plan at the moment, you can begin your QSEHRA as soon as you want. If you already have a plan in place, you’ll need to cancel your existing plan before the date you want the QSEHRA to start.
- Set a cancellation date for your group policy. Step two applies only if you already have a group health plan in place. If you do, you should schedule its cancellation date to occur before the start date of your QSEHRA. To avoid any gaps in coverage, it’s best to set the cancellation date the day before your QSEHRA starts.
- Confirm who will be eligible. Next, decide which employees you want to offer the QSEHRA to. You’re required to offer it to all full-time W-2 employees, though you have the option to offer it to part-time workers. If you decide to make part-time workers eligible, you must give them the same allowance amounts as full-time employees.
- Determine a budget and set allowances. Your next step is to decide how much you’ll give employees to reimburse their medical expenses and premium costs. There are a couple of ways you can do this: get details in 7 ways to budget with a QSEHRA.
- Establish legal plan documents. It’s critically important to comply with both IRS and Department of Labor rules regarding written plan documents for the QSEHRA. Your legal plan documents are required to cover a variety of subjects, including the amount of monthly allowances, eligibility for reimbursement of expenses, and other policies. Companies that fail to follow the rules face significant penalties, so don’t neglect this step. HRA software automates this for you and ensures your plan stays up to date with the latest regulations.
- Communicate your new benefit to employees. If your employees don’t know a new health benefit is available, they’re far less likely to use it. Make sure your workers are aware of your QSEHRA, and give them the information they need to take advantage of it. Additionally, ERISA rules mandate that employers provide employees a Summary Plan Description. You should let your employees know their annual QSEHRA allowance, steps for applying for and coordinating their premium tax credits, and how to obtain benefits in months when they’re missing minimum essential coverage.
- Provide resources to help employees buy individual health insurance. Health insurance policies don’t make for easy reading, and many employees are mystified by the complexities of their health benefits. If you implement the QSEHRA midyear, they're also likely to be confused about how to take advantage of their 60-day special enrollment period. As their employer, you can be a valuable source of information and support as your employees adjust to your new benefits—just remember that federal rules prohibit businesses from getting involved in employees’ decision making when it comes to choosing a particular provider or policy. In short, you can provide the tools to help employees make informed decisions, but you can’t help them decide.
- Follow all QSEHRA deadlines. The business must follow established QSEHRA deadlines, such as the employee notice requirement and responses to rejected reimbursement requests. QSEHRA plan documents also outline deadlines for fulfilling approved reimbursement requests.
How to simplify the QSEHRA set up process
Setting up a QSEHRA can be stressful for businesses that are trying to do it on their own.
Making a mistake at any stage, especially the crucial creation of plan documents, can be costly. If certain elements of the setup process stray outside of the strict QSEHRA definition in Section 9831 of the IRS Code, the business could face fines of up to $100 per day per employee.
To avoid these costs, as well as some of the hassle, many businesses turn to a QSEHRA software provider like PeopleKeep. These services automate plan documents and update them, send employees all required notices, provide insurance shopping resources for employees, and provide support for employee communication.
Key features to look for in QSEHRA administration software include: automated plan document creation, free plan amendments, online benefit administration and document review, the ability to easily document reimbursements, online support to answer questions so you don’t have to, and tools that ensure you remain compliant with federal and state rules.
Conclusion
Setting up a QSEHRA is a multistep process that can be complex but is made easier by a thorough understanding of the requirements or the use of a benefits software program.
If you are interested in administering your QSEHRA yourself, download our eBook: How to Self-Administer a QSEHRA.
This post was originally published on March 9, 2017. It was last updated on November 20, 2020.
