Offering your employees benefits is a great way to keep them engaged in your business. Determining the appropriate benefit to offer is tough, especially when you are trying to maximize your dollars. We get a lot of questions from small businesses asking if they can or should offer a QSEHRA and HSA together for their employees. We think offering both benefits together is a great way to maximize benefit dollars. But there are a few things you need to understand before you sign up.
What’s the difference between QSEHRA and HSA?
QSEHRA (Qualified Small Employer Health Reimbursement Arrangement):
Funded entirely by Employer (no employee contributions)
Account owned by Employer- funds stay with employer if employee leaves company
Reimburses health insurance premiums and medical expenses
Money is reimbursed for expenses/premiums after they are incurred and receipts are provided
Employees must have health insurance (minimum essential coverage) to participate
Tax benefits: Tax free for both employee and employer
HSA (Health Savings Account):
Funded by both employer and employee
Owned by Individual; employee takes funds with them when they leave
Employee has immediate access to money in account
Funds only for medical expenses that fall under the health plan’s deductible
HSA funds cannot be used for insurance premiums
HSA participants must have a High Deductible Health Plan (HDHP)
Tax benefits: tax deductible contributions, tax free reimbursements, and tax free accumulation of interest and dividends
How to offer the QSEHRA and HSA together
If your company would like to offer your employees both the QSEHRA and HSA together there are a few important things to note. In order to contribute to your employees HSA, the QSEHRA will need to be set up to reimburse premiums only. This way the QSEHRA will be HSA eligible. Employees will use the QSEHRA to reimburse their health insurance premiums, and the HSA to cover their medical expenses.
The IRS puts limits on how much employers can contribute to the funds each year. Here are the limits for 2022:
Individual Maximum Rate
Family Maximum Rate