IRS Releases Guidance on Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs)

11/01/2017

Yesterday, the Internal Revenue Service released Notice 2017-67  which provides guidance on Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs).  QSEHRAs were established under the 21st Century Cures Act enacted on December 13, 2016.  These new employer reimbursement plans provide a means in which small employers can continue to reimburse employees for qualified medical expenses, including premiums for health insurance policies, without running afoul of some of the provisions of the Affordable Care Act (ACA).  There were many open questions on the details of establishing a QSEHRA and ECFC submitted comments to the IRS on issues raised with these new arrangements.


The Notice is 59 pages and contains 79 questions and answers.  It provides many details on the requirements for establishing a QSEHRA, the tax consequences of a QSHRA and the written notice requirements for a QSEHRA.

The Notice addresses issues such as:

• Employers eligible to offer a QSEHRA.  Employers that offer ANY group health plans are not eligible to offer a QSEHRA.  In our comments to the IRS, we expressed our opinion that an employer that offered only a vision or dental benefit that qualifies as an excepted benefit should be eligible to offer a QSHRA; however, the IRS did not take that position in this notice.  As a result ANY GHP coverage—including FSA, HRA, vision, dental, or excepted benefit health coverage (such as limited purpose vision or dental FSA) would disqualify an employer AND THE members of its controlled group from offering a QSEHRA.
• What employees are eligible to participate in the QSEHRA, which employees can be excluded and how the arrangement can meet the requirement that it be offered on the same terms to all eligible employees.
• How the statutory dollar limits on reimbursements from the QSEHRA operate.
• The written notice requirements for QSEHRAs.
• Operation of reimbursements from a QSEHRA.
• Tax reporting requirements for payments and reimbursements from a QSEHRA.
• Interaction between ACA premium tax credits and QSEHRAs.
• Consequences of failure to meet the requirement to be a QSEHRA
• Interaction of QSEHRA and health savings accounts.
• Effective date of the guidance (November 20, 2017) and operation of QSEHRA prior to the effective date of the guidance.

This notice is the first step in the IRS providing proposed regulations regarding QSEHRA and they have requested comments on this Notice no later than January 19, 2018.  ECFC will analyze the provisions of the notice in greater detail, incorporating the comments and concerns of membership and provide comments to the IRS.  In addition, ECFC will be providing the membership a more detailed examination of the notice.

Media Contact:

Martin Trussell
(202) 659-4300
mtrussell@ecfc.org

About Employers Council on Flexible Compensation

The Employers Council on Flexible Compensation (ECFC) is a non-profit organization dedicated to the maintenance and expansion of private employee benefit programs on a tax-advantaged basis. The organization has two driving missions. The first is to represent and promote flexible compensation programs through effective lobbying. The second is to provide information on flexible compensation programs to member, national opinion leaders and the general public to help create a positive climate for the growth of flexible compensation.