Small businesses dealing with health insurance-related challenges received some welcome news in December with the passage of the 21st Century Cures Act, a new federal law that allows employers to expand their use of qualified small employer health reimbursement arrangements (QSEHRAs).
While the law contains numerous provisions, the ones most relevant to small businesses allow those with fewer than 50 employees to reimburse for qualifying healthcare expenses, such as premiums for coverage purchased independently. To be eligible, a business cannot offer any type of group healthcare plan to any of its employees. Those receiving the reimbursements also may not apply QSEHRA funds to health savings accounts established through their spouses.
The 21st Century Cures Act provides much-needed relief to small employers, who have been in a state of limbo over whether or not they would be able to continue their existing health reimbursement arrangements. These arrangements had been prohibited under the Patient Protection and Affordable Care Act, although the Department of Labor had issued several extensions to allow businesses to continue them for limited periods of time. Thus, the new law offers a more permanent solution.
Stipulations of QSEHRAs for small businesses
It is important to understand that QSEHRAs come with a number of requirements, including the following:
- All employees must receive access to reimbursements on the same terms. Some exceptions apply for those who have been with a company fewer than 90 days, part-time and seasonal workers and other exempt employees.
- Only employer contributions may fund the QSEHRA, with no withholdings from employee paychecks allowed.
- Employers may only contribute up to $4,950 for HRAs covering one employee, or up to $10,000 for family HRAs.
- To receive reimbursements, employees must provide documentation for all healthcare expenses, including insurance premiums, doctor’s visits, prescription costs and other qualifying expenses.
Federal law requires employers that plan on offering a QSEHRA to provide written notice to all qualifying employees at least 90 days prior to the start of the plan year or the date the employee becomes eligible for the reimbursement. This notice must include the maximum yearly amount available to the employee and any relevant tax or Affordable Care Act-related issues the employee may need to know before receiving HRA funds. For example, an HRA could impact an individual’s ability to receive tax credits from the federal government to pay for health coverage.
The rules and regulations surrounding healthcare coverage for employers are incredibly complicated—and there are likely more changes on the way with the incoming administration in Washington, D.C. To learn more about your options and to ensure you remain in compliance with federal and U.S. Virgin Islands law, consult a knowledgeable labor and employment law attorney.
Ravinder S. Nagi is Assistant Managing Attorney and Chair of the Labor and Employment Law Practice at BoltNagi, a widely respected and established labor law firm proudly serving businesses and organizations throughout the U.S. Virgin Islands.