Small businesses owners, take note! You can offer health reimbursement arrangements to your employees in 2018.
Yes, it’s true. Under the Qualified Small Employer Health Reimbursement Arrangements program, you too can offer your employees better health benefits through a reimbursement arrangement.
The History of QSEHRAs
The Qualified Small Employer Health Reimbursement Arrangements program was created in December 2016. Many small employers had been advocating for HRAs to cover individual premiums mandated by the ACA. The Treasury Department had rejected the idea, but the Twenty-First Century Cures Act, signed into law in December 2016, finally allowed HRAs for small employers.
More good news arrived in late 2017 when the IRS released Notice 2017-67. Contributions were actually increasing for the 2018 tax year!
Why Offer Health Reimbursement Arrangements?
Large employers have been able to realize the advantages of HRAs for a while now, but smaller employers have had to miss out on the action. Prior to now, HRAs were a benefits option available only to employers with more than 50 employees.
HRAs are popular with employers because they offer advantages for employee and employer alike. Under an HRA, employees can escape prescriptive benefits formulas that dictate how much they can spend on a particular type of benefit. HRAs allow the entire amount of the arrangement to be used for dental or vision care or whatever else the employee may need. No more “you have $700 for dental and that’s it!”
HRAs have another benefit for employees: There’s no deductible. Instead, the amount of your plan is available to them immediately. With more employers switching to high-deductible insurance plans to cut benefits costs, HRAs show another way forward.
HRAs also offer employers benefits. Essentially, the entire amount of the HRA contribution can be written off as a business expense. HRA contributions can add to your bottom line. That’s the complete inverse of traditional benefits arrangements, which become an expense you have to pay out!
In 2017, the annual maximum for a single employee was $4,950. For an employee and dependents, such as a spouse and children, the annual limit was $10,000. The IRS announced in October the amounts would be increasing in 2018, to $5,050 and $10,250 respectively.
That’s an increase of $100 for a single employee, and $250 for a family.
Amortizing the Costs
How much do HRAs actually cost? If you contributed the annual maximum for 2018 for a single employee, the costs would work out to about $21 per business day. For families, the cost is about double. The increases added less than $10 per month to the total.
As already noted, HRAs can also be claimed as business expenses on your taxes. They also count toward your bottom line, unlike traditional benefits arrangements. Any unused contribution is still the property of your business at the end of the year, making it an “asset” rather than a liability.
HRAs also tend to come with low administration costs. They’re quick and easy to set up, which makes them incredibly advantageous for small employers.
Do You Qualify?
A QSEHRA is designed for companies with fewer than 50 employees. If this describes your business, you could be qualified to implement a small business HRA for your organization.
The benefits of doing so are numerous. You can save time and money, while also giving your employees personalized, tax-free healthcare benefits. As health benefits are the number-one requested kind of benefit, this could help you attract and retain the best qualified talent in your field!
The QSEHRA program helps small business owners access this great option for offering benefits. Previously, this low-cost and flexible option was only available to large employers. Smaller employers were stuck with more traditional (and costly) one-size-fits-all plans.
If you haven’t considered setting up an HRA for your small business, talk to an advisor today! It could be the benefits solution you’ve been searching for.