For 2024, the contribution limits for Qualified Small Employer Health Reimbursement Arrangements (QSEHRA) are as follows:
- Self-Only Coverage: $6,150 per year, translating to a monthly cap of $512.50.
- Family Coverage: $12,450 annually, or $1,037.50 per month.
These limits reflect an increase from previous years, indicating an adjustment to the rising healthcare costs.
Specifically, the annual limit for self-only $300 annually for self-only coverage has increased by $300, while the family coverage limit has increased by $650 annually compared to 2023.
Benefits for Employers
For small employers, these enhanced limits offer an opportunity to provide more robust health reimbursement benefits. This is particularly significant in the current job market, where attractive benefits packages are key to recruiting and retaining top talent.
Learn More: The Complete Guide to Small Business HRAs – 2025 Update
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QSEHRA Eligibility
Business Size. QSEHRA is specifically designed for small businesses. To be eligible to offer a QSEHRA, a company must have fewer than 50 full-time equivalent employees (FTEs). This makes it an ideal solution for many small businesses that are not subject to the employer mandate under the Affordable Care Act (ACA).
No Group Health Plan. Only businesses that do not offer a group health insurance plan may use a QSEHRA. QSEHRA is intended to be an alternative to traditional group health insurance, not a supplement to it.
Non-Discrimination Rules. The QSEHRA must be offered to all full-time employees on the same terms. However, employers can exclude certain categories of employees, such as part-time or seasonal workers, employees under 25 years old, and those who have not completed 90 days of service. The exclusions must be consistent and not discriminatory.
Minimum Essential Coverage (MEC). The primary purpose of the QSEHRA is to allow employees of businesses that do not offer a group health plan of their own to purchase insurance coverage in the individual/family market.
To receive reimbursements through QSEHRA, employees must have health coverage that qualifies as minimum essential coverage under the ACA. This can include individual health insurance policies or Medicare.
Proof of Coverage. Employees must provide proof of their health coverage before they can receive reimbursements from the QSEHRA. Employers are required to verify this coverage to ensure compliance with IRS rules.
If an employee becomes eligible for QSEHRA partway through the year, you should prorate the annual contribution limit accordingly.
QSEHRA Mid-Year Eligibility and Proration
If an employee becomes eligible for QSEHRA partway through the year, you should prorate the annual contribution limit accordingly.
QSEHRA Flexibility in Budgeting
While the IRS sets maximum limits, there are no minimum contribution requirements for QSEHRAs.
You are not tied to any specific funding levels in future years. Furthermore, there is no requirement to commit QSEHRA funds in advance or segregate them from your operating capital. You are free to use that money to operate your business until it’s actually distributed as a benefit.
This allows you to tailor their health benefits budget according to your own financial situation and the specific needs of your workforce.
What if the QSEHRA Limits Aren’t Enough?
In regions where the cost of living and healthcare is exceptionally high, the QSEHRA limits might be inadequate.
If you’re in this situation, you should consider offering an Individual Coverage HRA (ICHRA) instead.
Unlike QSEHRAs, ICHRAs have no maximum contribution limits. They also offer greater flexibility in terms of employee allowances.
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QSEHRA Conclusion
For small businesses, QSEHRAs represent a flexible and effective way to support their employees’ healthcare needs.
The increased contribution limits for 2024 provide small businesses with more leeway to offer substantial health benefits.
Need help? Our experienced Personal Benefits Managers can provide expert guidance on all aspects of small business health benefits design and implementation.
For a free consultation, click here to make an appointment with an HSA For America Personal Benefits Manager.
For Further Reading: Health Care for Small Businesses: The Best Strategies for 2-20 Employees | The Most Effective Healthcare Strategies for Businesses With Fewer Than 50 Employees | Affordable Group Health Insurance for Small Businesses
Wiley is President of HSA for America. He believes that consumers should have choice and price transparency, so they can make the best healthcare decisions for their needs. Read more about Wiley on his Bio page.
