GAMBRELL FINANCIAL NEWS

QSE-HRA

 

Qualified Small Employers HRA

(Fewer than 50 full-time employees)

 

How does a small business set up a 2023 QSEHRA for employees?

The QSEHRA is a premium reimbursement Health Reimbursement Arrangement for qualified small employer groups that offer no group health plan to employees. The plan helps small businesses provide a valuable individual health insurance benefit to employees for far less than the cost of a group health plan.

 

Qualified Small Employers (fewer than 50 full-time employees) who do not offer a group health plan can now offer a Health Reimbursement Arrangement (HRA) that uses tax-free dollars to reimburse employees who purchase individual (non-group) health insurance on the individual market or the ACA exchange, along with eligible out-of-pocket medical, dental, and vision expenses.

How does a small business set up a QSEHRA benefit for employees? Order a Core Documents QSEHRA plan document package today, distribute the required written notice and SPD to employees, and you’re ready to go.

• No group health insurance premium makes the QSEHRA an affordable alternative for the small employer (with fewer than 50 employees).
• To qualify for the QSEHRA employers cannot offer another group health plan, including any other HRA or any type of Health Flexible Spending Arrangement (FSA) including plans that provide only excepted benefits (dental, vision, etc.).
• For 2023, the maximum allowed QSEHRA annual benefit is $5,850 per employee electing individual coverage, and $11,800 per employee electing family coverage.
• For 2022, the maximum allowed QSEHRA annual benefit was $5,450 per employee electing individual coverage, and $11,050 per employee electing family coverage.
• Health insurance premiums for insurance purchased on the ACA Marketplace qualify for reimbursement under the QSEHRA, but the amount of the QSEHRA must be reported through the marketplace and any premium tax credit will be reduced accordingly (pro-rated monthly).
• The employer must verify that the employee has qualifying health insurance (requiring proof of coverage) before issuing any reimbursements from the QSEHRA.
• Only an employer can contribute to the QSEHRA; employee contributions are not allowed.
• The QSEHRA is not eligible for COBRA continuation of benefits.
• The IRS and DOL only require employers to adopt a formal plan document and SPD to define the benefit design in writing.
• For complete IRS guidance on QSEHRA plans, see: IRS Notice 2017-67

 

 

No annual fee — Core Documents does not require an annual renewal fee to maintain your plan document package. A plan document only needs to be updated when there are changes in the plan or in the law that make it necessary. We will notify you when there are sufficient changes in the Code to require amending and restating your Plan and ask that you keep us informed when there is a change to your plan.  You can amend and update your plan document anytime, at a discounted fee and only when necessary, which is the most cost-effective way to maintain it.

*Fast Service — Most orders placed by 3 PM are returned via email the same day, Monday through Friday. Weekend orders are sent out Monday morning. Plan document packages are processed in the order received. During our busiest months (December, January, and February), the rush order fee (see order form) marks your document to be processed immediately.

Refund Policy: Goods and services provided by Core Documents, Inc. are non-refundable upon receipt. Orders cancelled prior to shipping are subject to a fee to cover the cost of goods and services provided during the review, draft, and preparation of your order.

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How to administer QSEHRA employees without health insurance

One of the most attractive features of a Qualifying Small Employer Health Reimbursement Arrangement (QSEHRA) is that employers with fewer than 50 full-time employees can provide funds to help those employees cover eligible health care expenses without having to pay for an expensive group health plan. However, since the 21st Century Cures Act that establishes the QSEHRA into law coordinates its rules with the Affordable Care Act (ACA), employers must guard against making QSEHRA reimbursement to employees without health insurance.

 

No employer group health plan, but . . .

Eligibility requirements for an employer to provide a QSEHRA to employees state that the employer must not have a group health plan available to active employees (ref. IRS Notice 2017-67, Topic A).

However, this does not mean that health insurance is not required before the employer makes a QSEHRA reimbursement.

For an employee to be eligible to receive QSEHRA reimbursement for qualifying medical expenses, the employee must bring his or her own health insurance to the plan.

The employee’s health insurance can be a plan they were under before the employer provided the QSEHRA. They may pay for it on the individual market or through the Health Insurance Marketplace. The employee may be covered under a spouse’s or parent’s health plan. Or, the employee may purchase a new health insurance plan and then be reimbursed for the premium from the employer’s QSE-HRA.

Proof of MEC required

For the employer’s part, evidence of coverage under a health plan that meets minimum essential coverage (MEC) requirements has to be on file for every employee (and eligible dependents, if applicable) before the first QSEHRA reimbursement of a plan year.

Attestation of continued coverage is required for every reimbursement made to that later in the plan year.

Until the employer receives the required proof of MEC from an employee, the employer cannot reimburse the employee from the QSE-HRA.

⇒ Read: What qualifies as proof of MEC for QSEHRA reimbursements?

Payment is reimbursed, not advanced

As mentioned earlier, some employees will purchase their MEC health plan for the first time with newly available QSEHRA funds in mind.

The employer has to make sure employees understand that a QSEHRA does not give an employee funds to go out and buy health insurance. It is a Qualified Small Employer Health Reimbursement Arrangement.

When an employee intends to purchase health coverage using funds available in a QSEHRA, the employee must first pay the premium and then submit proof of MEC along with receipt(s) documenting the premium paid. Then, the employer may reimburse the employee for the premium (up to the limits of the plan). To do otherwise means the employer is giving QSE-HRA reimbursement to employees without health insurance, which is not permitted.

No reimbursement on a taxable basis

When the QSEHRA came into law, the IRS issued only bare-bones guidance. At first, it sounded as if the QSEHRA could reimburse an employee without health insurance coverage for eligible medical expenses on a taxable basis with the reimbursements reported on their W-2 forms as taxable wages.

However, final IRS guidance (see below) prohibits making taxable QSEHRA reimbursement to employees without health insurance.

There are no exceptions to this rule.

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IRS Text on QSEHRA reimbursement to employees without health insurance, from IRS Notice 2017-67, pp. 28-29 states:

Question 43: May a QSEHRA reimburse an eligible employee on a taxable basis if the employee fails to provide proof of MEC for the individual for whom the employee seeks payments or reimbursements?

Answer 43: No.

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Why is it this way?

Some small employers have come to us frustrated that the law governing QSEHRA plans does not permit making QSE-HRA payments to employees who do not buy health insurance. They believe it could be far more helpful to employees, which is the employer’s goal, without that restriction. And, they’re right.

The reason for the proof of MEC requirement is that the Cures Act is written in accordance with the ACA and its coverage mandates. Small employers are exempt from the ACA employer group plan mandate, but Congress cannot allow employers of any size to provide funds for health care expenses without first requiring ACA-approved insurance coverage. To impose that requirement, the law uses the ACA individual mandate instead.

You are probably aware that the 2017 Tax Cuts and Jobs Acts removes the penalty for violating the individual mandate beginning in 2019, effectively killing it. While this may be the effect of the 2017 tax law, it is not the fact of ACA law. The ACA’s individual mandate itself remains firmly entrenched in the law and is written into the regulations governing the QSEHRA.

Until Congress acts to remove the ACA individual mandate from the law altogether — through repeal of the entire ACA or at least a proper repeal of its mandate provision  — QSEHRA rules prohibit making reimbursements to employees who do not buy health insurance.

 

 

CORE DOCUMENTS IS the Trusted Source of Affordable Benefit Plan Documents for over 20 Years.

Core Documents is the country’s leading provider of cost-effective, tax-saving benefit plan documents for Section 125 Cafeteria plans and Health Reimbursement Arrangements. The Trusted Source since 1997, thousands of satisfied agents and employer groups nationwide rely upon Core Documents for free plan design consulting services, plan document updates, ERISA Wrap SPDs, and administration services.

To get started with a QSE-HRA plan contact our office today.

Mel Gambrell
[email protected]
www.GambrellFinancial.com
919-519-2721
919-228-9783

Gambrell Financial Advisors are Core Document Advisors! 

HSAs Are Triple Tax-Advantaged Accounts!

Money is contributed to the account tax-free, any interest earned on the money is tax-free and distributions made on eligible expenses are tax-free as well.

 

But only 4% of all HSA participants invest the monies inside of their accounts, after 12 years of owning an HSA only 20% of participants are investing monies inside of their accounts. I have to assume; the vast majority simply don’t understand how these accounts work unaware of the investment options inside of their HSA accounts.

The one little secret that really blows it out the water with an H.S.A. is this:

Instead of claiming your deductions in the year in which they occur, let’s hold off a while. Let’s delay claiming those reimbursements until age 65 when you retire.

In the meantime, make sure you track your HSA eligible expenses… WHY?

The IRS doesn’t impose an expiration date on HSA reimbursements! You can receive a reimbursement from 20 to 30 years ago providing you have documentation for your eligible medical expenses and of course providing you own an HSA> for the years you are claiming reimbursement.

You can track your eligible expenses for 20 year or longer it doesn’t matter.

Let’s say you contribute $5,000 each year for 25 years starting at age 40, with a total contribution of $125,517 by age 65!

At 6% the total account value would be $285,174.

Let’s say over 25 years you spent $200,000 on eligible medical expenses.

At age 65 you can claim a $200,000 dollar income tax free lump sum reimbursement on these eligible medical expenses incurred over the last 25 years.

 

The money goes in tax free, the money grows tax free, and the money comes out tax free…

The Triple Tax Advantage!

NOW! We all know health care in retirement is expected to become very expensive. In this scenario after claiming a $200,000 lump sum reimbursement, you would still have $85,175 ready for you to use income tax free on eligible medical expenses during retirement.

And I must say, the list of eligible medical expenses is huge.

You can even get reimbursed for BC Powder, guys you can get reimbursed for condoms, the list of eligible medical expenses is huge. I’ll provide a link below with a list of 3,000 items you can seek reimbursement for.

 

The list of eligible medical expenses is so large, most people will easily exceed spending $200,000 by the time they reach retirement.

 

 

As an HSA owner you can choose to invest your savings so that they grow at the rate of the market or to keep it in a savings account earning interest. The money never expires and rolls over from year-to-year.

 

Anyone can contribute to an employee’s HSA. That includes the employees themselves, their employer, their friends, and their family, however the total of all contributions must not exceed the IRS’s annual contribution limit for that year. The HSA contribution limits for 2023 are $3,850 for self-only coverage and $7,750 for family coverage. Those 55 and older can contribute an additional $1,000 as a catch-up contribution.

 

HSA contribution guidelines in essence allow employers to double dip when contributing funds to an employee’s retirement accounts. An employer can match your contributions up to a set amount in your 401k accounts and contribute up to the current year’s maximum allowable amount in an HSA. How cool is that!

Start tracking and saving your receipts on over 3,000 plus items you spend money on everyday but didn’t realize you could seek reimbursement for.

Don’t claim these reimbursements today, delay until age 65 when you can claim a reimbursement on the growth of your account as well as the seed.

 

The IRS gives you an “Unlimited Amount of Time To Claim A Reimbursement” even if it’s 30 or 40 years later as long as you keep your documentation in order.

One final note, you don’t want to over contribute to an HSA, my office can you determine the optimal amount of money you should be contributing to your HSA.

Typically, we’ll plan for an amount of health care related expenses you might incur over 30 years or until age 65 while also factoring in an average growth rate of return.

The ideal scenario is to receive an income tax free lump sum reimbursement of at least $200,000 at age 65 while also maintaining a balance of tax-free money you can use for future medical expenses during retirement.

This potential $200,000 lump sum reimbursement at age 65 can allow you to delay early social security benefits. Each year you delay receiving social security benefits will add an extra 8% to your social security income till age 70!

A $200,000 lump sum income tax free reimbursement can help you bridge the gap allowing you to receive more income during retirement.

With a lump sum of $200,000 or more sitting in your account you can kick back and continue allowing your other accounts to grow while also having access to future tax free medical reimbursements during your retirement years.

 

Contact our office today for a comprehensive HSA strategy designed to help you win, in retirement!

my name is Mel Gambrell and For any questions comments or concerns please reach out to us by email to [email protected]

For small buizz with

 

 

lets go home