Is an HRA the Right Choice for Your Business in 2020?

Up to 74% of today’s employees say that having a health insurance plan gives them peace of mind and boosts their company loyalty. But is an HRA the right choice for your business in 2020? We think so. Read on to find out why.

What is a QSEHRA and Why is it Good for Your Business?

A qualified small employer HRA (QSEHRA) is one that is designed specifically for small businesses that have fewer than 50 full-time employees. As a business owner, it enables you to offer employees a monthly allowance of tax-advantages money. You determine the amount at the outset.

One of the main benefits of a QSEHRA is that it enables employees to customize their benefit options based on their personal or family needs. This can include individual insurance policies, dental services, prescriptions, and medical services, for example. When an employee uses their chosen health care, he or she then submits proof of their expense to the employer, who then reimburses their allowance towards the cost. QSEHRA reimbursements are exempt from payroll taxes for both business owners and their employees.

How to Set Up and Run a Healthy Reimbursement Arrangement

Here are some tips to help you get your QSEHRA up and running:

  • Choose a start date: If your business currently has no health plan in place, you can start your QSEHRA as soon as you are ready. If you do have a health plan, you will need to cancel it first.

  • Decide which employees will be eligible: You must offer the QSEHRA to all your existing full-time employees. Whether you also offer it to part-time workers or not is up to you. If you do, you must provide the same terms to them as you do to full-time employees.

  • Budget your allowances: Decide how much you will reimburse your employees.

  • Provide legal documents: Your plan documents for your QSEHRA must comply with the Department of Labor and IRS rules. They must also cover all the required information, such as eligibility and monthly reimbursement amounts.

  • Inform your employees of the new benefit: Your employees won’t be able to use the QSEHRA unless they are aware that it exists. Make sure they know about it and give them enough information to allow them to make an informed decision. Don’t forget that ERISA mandates that you give all employees a copy of the Summary Plan Description. You also need to let your workers know the exact amount of their annual QSEHRA reimbursement allowance, how they apply for tax credits, and how to get benefits during months when they have no essential coverage.

  • Provide health insurance resources: Health insurance policies can be complicated, and many employees do not understand their intricacies. Providing resources that can help them choose individual health insurance plans can help them out. If you commence your QSEHRA midyear, you will also need to provide them with information about their 60-day enrollment period. While it’s helpful to provide information as your workers adjust to the new benefits, you must avoid getting involved in their decision making, as this is a violation of federal rules.

  • Follow all QSEHRA deadlines: There are QSEHRA deadlines in place that must be adhered to. For example, the notice requirement to employees whose request for reimbursement has been rejected. Similarly, there are deadlines for accepted reimbursement requests.

How to Communicate Your New Benefit to Employees

You are required by law to communicate the following to your employees:

  • The amount of the contribution the employee is eligible for each year

  • How employees should inform a health insurance exchange about their contribution

  • An employee who does not have minimum essential coverage for any month of the year may be taxed for that month on any reimbursements

Here at Zupnik and Associates, we can help you provide your employees with the best available benefits packages. By working closely with carriers to negotiate the best prices, we can provide you with the best prices. Call us today on (718) 534-1194 to find out more. 

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