A qualified small employer (one that employs fewer than 50 full-time (including full-time equivalent) employees, and does not offer a group health plan to any of its employees) may offer a QSEHRA to its employees for the payment or reimbursement of eligible medical expenses (including individual insurance policy premiums) on a pre-tax basis.
The QSEHRA must be provided on the same terms to all eligible employees.
The church must report the total amount of the annual permitted benefit on each employee’s W-2 (Box 12, Code FF).
The QSEHRA will be funded solely by the church; no employee salary reduction contributions are allowed. The church will contribute amounts necessary to meet its obligations under the
QSEHRA out of its general assets. There are no segregated funds established to collect or maintain the contributions.
The QSEHRA will provide for the pre-tax payment or reimbursement of expenses for medical described in section 213(d) of the Code (including premiums for individual health insurance)
incurred by you or your family members, after you provide proof of the health coverage or expense to your employer.
The 2019 maximum amount of reimbursement or payment from the QSEHRA during the plan year is described in section 9831(d) of the Code (currently $5,150 for an eligible employee and $10,450
if family members are covered under the QSEHRA; these amounts may be adjusted in future years). If you are not covered for an entire plan year, the dollar limit is pro-rated for the number of months you are covered under the QSEHRA.
The QSEHRA can only reimburse health insurance premiums that are not covered under any other benefit program. If you are covered by your spouse’s employer’s group health plan, reimbursement for that coverage will be allowed on a pre-tax QSEHRA basis only if your spouse paid for the health coverage on an after-tax basis.
There is no carryover of any unused benefit from one plan year to another. No cash outs are allowed. If your participation in the QSEHRA ends, the period of coverage ends on the day of the
terminating event and any expenses incurred after that date are ineligible for reimbursement, even if you have not incurred qualified expenses equal to the amount allocated on your behalf under the QSEHRA before that date.
A QSEHRA benefit will reduce the amount of premium tax credits received from a federal or state marketplace.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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