HRA Reimbursements: Payroll Setup Guide
As the business owner or plan administrator, you have flexibility in how reimbursements are handled—and ultimately, you make the final decision.
Remember, the tax-free nature of a QSEHRA or ICHRA depends on:
Having compliant plan documents in place
Maintaining ongoing compliance
Completing proper year-end W-2 reporting
With Take Command Health’s HRA platform, we take care of these requirements for you. We:
Track employee claims
Provide a monthly Reimbursement Statement
Clearly show how much to reimburse each employee
👉 Learn more: Reimbursement Statement
Reimbursement Methods
Getting funds to employees is the final step. Common methods include:
✅ Reimburse through your payroll system (recommended)
Write a check
Pay cash
Use PayPal or another transfer service
We strongly recommend using your payroll system because it:
Simplifies tracking
Enables direct deposit
Automates recurring reimbursements
Reduces administrative work
In this article, we'll explain how to setup and make HRA reimbursements through your payroll system. We recommend reimbursing through payroll because it makes it easy to track reimbursements, will direct deposit into your employees' accounts (assuming they have that set up), and can roll-forward automatically each month to make your job, as the administrator, much easier.
General Instructions for HRA + Payroll
Depending on your payroll provider, you may need assistance from your payroll administrator.
How the reimbursement process works:
Employees pay insurance premiums directly
Employees submit claims for eligible expenses
Employers reimburse based on Take Command’s monthly statements
👉 Admin portal access: https://admin.takecommandhealth.com/
These statements include:
Employee allowance amounts
Carryover balances
Approved reimbursement totals
Tax-Free Reimbursements (ICHRA & QSEHRA)
Most reimbursements under ICHRA and QSEHRA are tax-free, meaning:
They are excluded from employee gross income
They are not subject to payroll taxes
They do not appear as taxable wages
Key reporting rules
QSEHRA only:
Report the annual allowance offered (not reimbursed amount)
Include in Form W-2, Box 12, Code FF
ICHRA:
No specific W-2 reporting requirement
👉 IRS overview: https://www.irs.gov/affordable-care-act
How to Set Up Tax-Free Reimbursements
Follow these steps to set up tax-free reimbursements in your payroll system:
Open or edit your employee’s pay profile
Add a recurring, non-taxable reimbursement or expense type
Enter the amount from the Take Command Health Reimbursement Statement
Be sure to verify the accuracy of the amount to maintain employee privacy and ensure compliance
Save or schedule the change for the next pay run
Most payroll systems will carry that amount forward each month. For example, if you added a $200/mo reimbursement for an employee, the recurring settings should carry that forward so that the employee will get the same $200/mo until changed. That means you'll only need to make adjustments when there is a change. This makes it super easy for premium-only HRAs, as the amounts will not change very often and can roll forward. For HRAs that include medical expenses, you'll need to make a quick edit each month beforehand if the amount is different. To help, you can choose the day of the month you'd like Take Command Health to deliver the
Reimbursement Statement so that you have time to make these changes before a pay run (In the admin settings, under Reimbursements, you can change the day of the month for the Reimbursement Statement). Take Command also allows for flexible reimbursement cadences such as semi-monthly or bi-weekly in addition to the default monthly cadence. This flexibility helps align with various payroll schedules and ensures timely reimbursements for employees.
Taxable Reimbursements (QSEHRA Only)
While most QSEHRA reimbursements are tax-free, certain exceptions require taxable treatment.
When reimbursements become taxable
A reimbursement must be taxed if:
The premium was paid pre-tax through a spouse’s employer-sponsored plan
This rule exists to prevent double tax advantages, which are prohibited by the IRS.
👉 Learn more: https://www.irs.gov/affordable-care-act
While most reimbursements through QSEHRA are tax-free, there are a few types of allowable reimbursements that must be taxed. Under IRS rules, group plan premiums paid pre-tax through a spouse's employer cannot also qualify for tax-free QSEHRA reimbursement, avoiding double benefits. To qualify for tax-free reimbursement, you must demonstrate the premium was paid post-tax, which is rare.
Taxable reimbursements are reported as income and taxed like regular Wages with income & payroll taxes withheld. You can usually enter this as an "Additional Income" or "Other Earnings" line item but check with your payroll company on the best way to categorize it. The only taxable reimbursements through QSEHRA include premiums paid pre-tax through a spouse's employer for a group plan. Your employer has the option to allow taxable reimbursements in these instances, based on company discretion.
Correcting Tax Classification Errors
Mistakes occasionally happen, but corrections are simple within Take Command:
Navigate to Employee Reimbursements
Select the relevant employee and month
Adjust:
"Tax-Free" and "Taxable" fields reflect the correct amounts.
Save changes
Updates will automatically flow into your reporting and payroll exports.
Note: You can choose whether or not to allow for these taxable reimbursements through your QSEHRA- if you're not sure if you allow these or not, just reach out to us and we can let you know! Additionally, the Take Command admin portal allows you to manage and adjust taxable versus non-taxable reimbursements efficiently.
Verifying Eligible Expenses (ICHRA)
Eligibility depends on the employee’s insurance plan, not just the expense type.
To verify coverage:
Review the employee’s policy
Check plan documentation
Confirm whether the expense is included
For example:
A Direct Primary Care (DPC) membership may or may not qualify
It depends entirely on the policy’s terms
👉 Resource: https://www.takecommandhealth.com/blog
Year-End W-2 Reporting (QSEHRA Only)
At year end:
Report the amount offered (not reimbursed)
Enter in:
Box 12, Code FF
👉 W-2 instructions: https://www.irs.gov/forms-pubs/about-form-w-2
👉 W-2 instructions: W-2 Reporting: Where & How do I report QSEHRA reimbursements on my employees’ W-2? | Take Command Help Center
Important:
This is not the reimbursed amount
It reflects what the employee was eligible to receive
Coordinate with:
Your CPA
Your payroll provider
Some systems allow automated coding, while others require manual entry.
Specific Providers
Ok, so those are the general instructions that should work for most payroll providers (again, you may need to ask someone at the payroll firm you use to help or share these instructions).
Payroll Provider Instructions
ADP Run
Use:
“Employer Paid Individual Coverage HRA”
Or similar employer healthcare categories
Gusto
Paycom
QuickBooks / Intuit Online Payroll
QuickBooks Desktop
Paychex
CSV Uploads & Payroll Integration
Take Command simplifies payroll coordination by providing:
Downloadable CSV reimbursement files
Pre-formatted data for payroll imports
Clear distinction between:
Tax-free reimbursements
Taxable reimbursements
This reduces manual entry errors and speeds up payroll processing.
Summary
Using payroll for HRA reimbursements is the most efficient and compliant method because it:
Ensures accurate documentation
Aligns with existing payment systems
Supports automation and scalability
Simplifies tax and audit processes
With Take Command Health:
Compliance is built into the system
Reimbursements are tracked and verified
Payroll integration is streamlined