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.
Eligibility Criteria for HSA Contributions While Using QSEHRA
Employees can contribute to an HSA while participating in a QSEHRA if the QSEHRA is structured to reimburse insurance premiums only. In this scenario:
Employees must be enrolled in an HSA-compatible HDHP.
They can use the QSEHRA for premium reimbursements and the HSA for other qualified medical expenses. If the QSEHRA reimburses both premiums and medical expenses (a general-purpose QSEHRA), employees are not eligible to contribute to an HSA. However:
Existing HSA funds can still be used for qualified medical expenses.
Employees cannot make new contributions to their HSA.
The IRS puts limits on how much employers can contribute to the funds each year. Here are the limits: 2026 QSEHRA Limits and Reimbursements Guide
Frequently Asked Questions
Do Health Plans Need to Be HSA-Compatible for QSEHRA Reimbursement?
No. QSEHRA reimbursement eligibility is based on whether the health plan provides Minimum Essential Coverage (MEC) under IRS rules. HSA compatibility is not a requirement for QSEHRA reimbursement.
Can I Switch to a Different Plan to Become Eligible for QSEHRA Reimbursement?
Yes, you can switch to a plan that meets IRS guidelines to become eligible for QSEHRA reimbursement. Ensure the new plan provides MEC.
Why Does an Employee Show as 'HSA' When the Business Offers QSEHRA and Not HSA?
Employees may independently choose an HSA-eligible health plan, resulting in an 'HSA' label associated with their plan. However, this does not mean the employer is offering an HSA benefit. Employees participating in a QSEHRA cannot make new HSA contributions but can use existing HSA funds for qualified expenses.
Scenarios Involving Family and Spouse Contributions
Family Coverage and QSEHRA Benefits
Employees can receive the full family QSEHRA benefit even if they are on a separate healthcare plan from their dependents. The family allowance is determined by tax dependency status, not by whether all family members are on the same plan. Proof of coverage must be submitted for all covered individuals.
Spouse Contributions to an HSA
If an employee is ineligible to contribute to an HSA due to QSEHRA participation, their spouse may still contribute to their own HSA. Contribution limits depend on the coverage under the spouse’s HSA-compatible HDHP:
Self-only coverage: The spouse can contribute up to the individual HSA limit.
Family coverage: The spouse can contribute up to the family HSA limit if children are also covered.
Tax Implications and Compliance Tips
Avoiding Double-Dipping: Employees cannot receive QSEHRA reimbursements for expenses already paid or reimbursed through an HSA. This rule ensures compliance with IRS guidelines.
Consult a Tax Advisor: For complex scenarios, such as managing family HSAs and QSEHRA benefits, consulting a tax advisor is recommended to avoid tax conflicts.