Tucked at the end of the recently enacted 300-plus-page 21st Century Cures Act (Cures Act) is a provision that offers certain small employers a new opportunity to help employees purchase individual market major medical coverage and pay for other medical expenses.
The new health reimbursement arrangement vehicle, called Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), is available to employers that are not subject to the Affordable Care Act (ACA) employer responsibility penalties – i.e., employers that have less than 50 full-time equivalent employees and thus are not applicable large employers (ALEs). Many small employers are likely to find QSEHRAs attractive, but there are some features that should be looked at carefully before deciding to move forward. These include a requirement that a QSEHRA can only be funded through direct employer contributions (meaning that no employee salary reduction contributions are permitted), nondiscrimination rules, and a provision prohibiting employers from maintaining another group health plan.
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