If you’re interested in establishing a small business HRA, or qualified small employer health reimbursement arrangement (QSEHRA), for your company, you might feel overwhelmed by the idea of implementing something new.
When you break the process down step by step, however, it’s easy to see that setting up a health reimbursement arrangement (HRA) is not nearly as intimidating as you might think—particularly if you choose a QSEHRA administration tool to help you get started.
We’ve broken the QSEHRA setup process down into eight steps that are simple to follow and easy to understand.
How to set up a small business HRA (QSEHRA)
- Pick a start date. The first step is straightforward: you need 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. However, if you already have a plan in place, you’ll need to cancel it before setting your QSEHRA in motion.
- 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 also best to set the cancellation date one day before your QSEHRA begins.
- Confirm who will be eligible. Next, decide which employees qualify for the QSEHRA. You’re required to offer it to any full-time W-2 employee, though you have the option to offer it to part-time workers. However, 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 in7 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.
- 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 give their workers 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.
Making QSEHRA setup easier
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: personalized plan documents, free plan amendments, online benefit administration, the ability to easily document reimbursements, and tools that ensure you remain compliant with federal and state rules.
Setting up a QSEHRA is a multistep process that contains some complexities, but is made easier by a thorough understanding of the requirements or the use of a benefits software program.
For comprehensive information about the QSEHRA, and for a step-by-step guide for successful QSEHRA setup for your company, download our free eBook, The Comprehensive Guide to the Small Business HRA.
Interested in using the QSEHRA for your company? Let us know your questions in the comments below.