What Size Companies Are Eligible for Health Reimbursement Accounts

To be eligible for a Health Reimbursement Account (HRA), a company must have at least one employee other than the owner or their spouse.

Small businesses are often the primary beneficiaries of HRAs, with some employers able to offer HRAs to employees with as few as 2-10 workers.

There's no maximum limit on the number of employees a company can have to be eligible for an HRA, but larger companies may have more complex requirements and regulations to follow.

In general, employers with more employees will have more flexibility in how they design and implement their HRA plans.

A Health Reimbursement Arrangement (HRA) is a plan that allows employers to reimburse employees for medical expenses.

It's essentially a way for businesses to help their employees cover healthcare costs, and it's a pretty straightforward concept.

Employers with fewer than 50 full-time workers can set up an HRA, which is also known as a small business HRA or a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).

The money reimbursed through the plan is tax-free for employees and tax-deductible for employers, making it a cost-effective way for businesses to support their employees' healthcare needs.

In fact, any money reimbursed through a QSEHRA is tax-free for employees and tax-deductible for employers, which is a big plus for both parties.

To be eligible for an individual coverage HRA (ICHRA) offer, employees must meet certain criteria. This includes being full-time, part-time, or seasonal, or covered by a collective bargaining agreement.

Employees can also be eligible if they're salaried or non-salaried, like hourly workers, or if they haven't satisfied a waiting period. Additionally, non-resident aliens with no U.S.-based income and employees with various work locations are also eligible.

Here's a breakdown of the minimum class size requirements for ICHRAs and another type of HRA, QSEHRA:

Employers of all sizes can offer an ICHRA, but they must not offer a group health plan to the same class of employees. On the other hand, QSEHRA is only available to employers with fewer than 50 full-time employees and they cannot offer any group health insurance plans.

To offer a Health Reimbursement Arrangement (HRA), you'll need to meet some requirements. The type of HRA you're offering determines the rules you need to follow.

For an Individual Coverage Health Reimbursement Arrangement (ICHRA), there's no size restriction. Any employer can offer an ICHRA, regardless of their number of full-time employees.

Employers offering an ICHRA can't offer a group health plan to the same class of employees. For example, they might offer a group plan to full-time employees and an ICHRA to part-time employees.

Here's a quick breakdown of the HRA types:

Employers with less than 50 full-time employees can offer a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). This type of HRA has stricter rules than an ICHRA.

To determine which employees are eligible for your individual coverage HRA offer, you'll want to consider their employment status. Full-time, part-time, or seasonal status all qualify, as do employees covered by a collective bargaining agreement.

Salaried or non-salaried employees, like hourly workers, are also eligible. However, employees who haven't satisfied a waiting period are not yet qualified.

Additionally, non-resident aliens with no U.S.-based income are eligible, as are employees based in different work locations. You can also combine these categories to determine eligibility.

Here's a summary of the minimum class size requirements based on the size of your employer:

To comply with the law, all employees covered by a QSEHRA must benefit from it equally. Employers are not required to include new, part-time, or seasonal workers in the benefits they provide.

Employers must report the amount of reimbursement an employee was entitled to receive on their annual Form W-2, using code FF, even if the employee didn't receive the full amount. This figure may be different from the amount of reimbursement the employee actually received.

Employers must also give employees a summary plan description that details their plan benefits, as required by ERISA regulations.

The maximum contribution limit for QSEHRA accounts is set by the IRS, and it can change annually based on the cost of living. In 2024, the limit is $6,150 per individual employee.

Employers can contribute up to $12,450 to cover an employee and their eligible household members. This amount is also subject to annual changes.

Employees who are hired mid-year can receive a prorated amount of the full-year maximum reimbursement, allowing them to still benefit from the QSEHRA program.

To comply with the law, all employees covered by a QSEHRA must benefit from it equally. This means if you offer a QSEHRA to any full-time employees, you must cover all of them.

Employers are not required to include new, part-time, or seasonal workers in the benefits they provide. However, participating employees must provide proof that they carry the minimum essential health coverage required by the ACA.

You'll need to report the amount of reimbursement an employee was entitled to receive for the calendar year just ended in box 12 of their Form W-2: Wage and Tax Statement, using code FF. This figure may be different from the amount of reimbursement the employee actually received.

Employers must also give employees a summary plan description that details their QSEHRA plan benefits, as required by ERISA regulations.

An excepted benefit HRA (EBHRA) is a type of HRA that employers can offer in conjunction with a group health plan, but the employee isn't required to enroll in the group plan to be eligible.

Employers can offer EBHRAs, which allows them to provide additional benefits to their employees without having to meet the Affordable Care Act's (ACA) minimum essential coverage requirements.

An EBHRA is a type of HRA that can be offered to employees who are not enrolled in the group health plan, making it a flexible option for employers to provide benefits to their employees.

ICHRA is a type of HRA that allows employers of all sizes to reimburse their employees for individual health insurance premiums and other qualified medical expenses.

ICHRA is pronounced "ick-rah." It's a flexible option for employers to support their employees' healthcare needs.

QSEHRA is a type of HRA available only for employers with less than 50 full-time employees.

QSEHRA doesn't fall under the affordability guidelines of the healthcare mandate, but affordability still impacts employees' ability to qualify for the premium tax credit.