The IRS has released guidance further clarifying the rules regulating qualified small employer health reimbursement arrangements (QSEHRAs). QSEHRAs—which are health reimbursement arrangements exempt from the Affordable Care Act's market reforms—may be offered by employers with fewer than 50 full-time equivalent employees that do not offer a group health plan to any of its employees to reimburse employees for medical expenses, including individual health insurance policy premiums.
Highlights of the guidance are as follows:
- Written Notice Deadline: An employer that provides a QSEHRA during 2017 or 2018 must generally furnish its initial written notice to its eligible employees by the later of (a) February 19, 2018, or (b) 90 days before the first day of the plan year of the QSEHRA. Q&A #38 of the guidance explains what information must be included in the notice.
- "Same Terms" Requirement: Employers are required to provide the QSEHRA on the same terms to all eligible employees. However, the guidance states that QSEHRA payments or reimbursements may vary based on the age of covered individuals or the number of individuals covered in accordance with the variation in the price of an insurance policy in a relevant individual health insurance market.
Form W-2 & PCORI Requirements: An employee's permitted benefit under a QSEHRA must be reported in box 12 of his or her Form W-2 using code FF. In addition, QSEHRA sponsors are subject to the Patient-Centered Outcome Research Institute (PCORI) fee, which generally requires them to file Form 720, Quarterly Federal Excise Tax Return, annually by July 31 of the year following the last day of the plan year.