Are qualified small employer health reimbursement arrangements (QSEHRAs) covered by ERISA and do they need to be included in the Wrap documents?

Although QSEHRAs are not considered "group health plans" for purposes of the ACA's market reforms that amended ERISA, they are still subject to ERISA's plan documentation and disclosure requirements. For that reason, a QSEHRA needs a Plan Document and SPD. As a result, if the employer offers a QSEHRA, a QSEHRA Plan Document and SPD should be generated in Wrap360.

The QSEHRA can either be a benefit component plan that is incorporated into a Wrap Plan (just like, for example, dental or vision benefits), in which case the QSEHRA SPD can be distributed as part of—and along with—the Wrap SPD, or the QSEHRA can function as a stand-alone plan that is not part of the Wrap Plan. Keep in mind that an employer is only eligible to offer a QSEHRA if it does not offer a group health plan to any of its employees, among other requirements.

 How can I generate a standalone QSEHRA SPD and Plan Document in Wrap360?

Select "Qualified Small Employer HRA (QSEHRA)" as a type of benefit, then enter the required information for the QSEHRA on the benefit component information page. When generating your documents, select "QSEHRA" to generate the standalone QSEHRA SPD and Plan Document.

Please note that you are required to input certain general plan information in order to generate a QSEHRA (such as eligibility information), however this information will not appear in the QSEHRA documents. This information only appears in the Wrap documents.

 What is a QSEHRA and what types of employers can offer one?

The 21st Century Cures Act allows certain small employers—generally those with fewer than 50 full-time equivalent employees that do not offer a group health plan and that meet the law's notice and benefit requirements—to offer "qualified small employer health reimbursement arrangements" to reimburse employees for qualified medical expenses, including individual health insurance premiums. Thus, large employers and employers that offer a group health plan cannot offer QSEHRAs.

To qualify as a QSEHRA, an arrangement generally must:

  • Be funded solely by an eligible employer without salary reduction contributions;
  • Provide, after an eligible employee provides proof of coverage, payment or reimbursement of qualified medical expenses (which includes individual health insurance premiums) incurred by the employee or his or her family members;
  • Limit annual payments and reimbursements to a certain amount prescribed by law; and
  • Be provided on the same terms to all eligible employees.

 What is the notice requirement for employers that offer a QSEHRA?

The 21st Century Cures Act requires employers funding a QSEHRA for any year to provide a written notice to each eligible employee that includes information related to the employee's permitted benefit under the arrangement for the year and how the arrangement affects advance payment of the premium tax credit and the individual mandate.

The notice generally must be provided no later than 90 days before the beginning of a year in which the QSEHRA is funded—or, if an employee is not eligible to participate in the arrangement as of the beginning of such year, the date on which the employee is first eligible.

However, the IRS has announced its intention to issue additional guidance concerning the contents of the written notice in the near future. Until the issuance of such guidance, employers that provide QSEHRAs for years beginning in 2017 are not required to furnish the initial written notice to eligible employees, and no penalties will be imposed for failure to provide the notice. Employers that furnish the QSEHRA notice to eligible employees before further guidance is issued may rely upon a reasonable good faith interpretation of the 21st Century Cures Act to determine the contents of the notice.

 What types of employees are eligible for QSEHRAs?

QSEHRAs generally must be provided on the same terms to all eligible employees. However, employers may exclude certain employees from QSEHRA eligibility, including those who:

  • Have not completed 90 days of service;
  • Have not attained age 25;
  • Are part-time or seasonal;
  • Are covered by certain collective bargaining agreements; or
  • Are nonresident aliens whose income did not come from a U.S. source.

The QSEHRA documents give the Plan Administrator discretion to exclude these employees in the "Eligibility and Benefits" section of the QSEHRA SPD and Article II of the QSEHRA Plan Document.

Please Note: Wrap360 and its employees and officers are not permitted to offer legal advice. These FAQs are provided for general information purposes only. As the answers to specific questions may vary based on federal or state law, as well as on company documents for the issues in question, it would be prudent to consult knowledgeable benefits counsel for individualized guidance.