Can I offer QSEHRA to employees in different states

It’s easy for employers to offer an individual coverage HRA (ICHRAs) to employees located in other states, but is the same true for qualified small employer HRAs (QSEHRAs)? This article discusses what employers who want to offer a health benefit to a workforce located in different states should know when evaluating a QSEHRA.

Why QSEHRA is a good option for organizations with employees in multiple states

A QSEHRA is a great approach for employers with workers located in multiple states. Employees can use their QSEHRA allowance to pay for any eligible medical expense, including individual health insurance premiums. This money is free from payroll taxes for both the employer and their employees and free from income taxes, as long as the employee purchases a plan that provides minimum essential coverage (MEC).

Even so, employers looking into a QSEHRA should consider the following:

• Your organization must have fewer than 50 full-time equivalent employees total across all states. See this article for information about calculating full-time equivalents.
• Your organization cannot offer both a QSEHRA and a group health plan. For example, it’s not possible for you to offer a group health plan to some employees in your “home state” and a QSEHRA to out-of-state employees.
• QSEHRA has allowance limits. These limits are evaluated by the IRS each year and are based on family status, either single or family (the employee, plus a spouse or any dependents). See this article for this year’s limits.
• The QSEHRA benefit you offer must be the same for all of your employees. Individual insurance rates can vary greatly by state, which means that employees in one state might find the QSEHRA very valuable, while employees in another state might find the benefit less valuable.

Download this handy chart to see the cost of individual health insurance by state

Conclusion

A QSEHRA is a great health benefit option for employers who want to provide a health benefit to employees in multiple states and who aren’t offering a group health insurance plan. Employers who do have a group health plan or who want to customize allowances for employees in different states should consider an ICHRA.

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