Must employers report QSEHRA benefits on Form W-2?

Question: Our company is exploring the idea of offering a qualified small employer health reimbursement arrangement (QSEHRA). If we decide to go this route, would we be required to report any information about this benefit on employees’ Forms W-2?

Answer: Yes. If an employee is covered under a QSEHRA, the employer must report the total amount of the employee’s permitted QSEHRA benefit on Form W-2 in Box 12, using Code “FF.”

As you’ve no doubt discovered during your research, QSEHRAs are a type of Health Reimbursement Arrangement (HRA) that first became available in 2017. Unlike other HRAs, QSEHRAs aren’t considered group health plans for most purposes. In addition, they can be offered only by employers that don’t offer a group health plan and aren’t applicable large employers as defined under Internal Revenue Code Section 4980H. Note that HRAs that aren’t QSEHRAs are subject to separate Form W-2 reporting requirements under the Affordable Care Act.

IRS guidance clarifies that an employer must report the amount of payments and reimbursements that the eligible employee is entitled to receive from the QSEHRA for the calendar year (the employee’s “permitted benefit”) without regard to the payments or reimbursements received. (For 2018, the maximum permitted benefit for an eligible employee under a QSEHRA is $5,050 for self-only coverage and $10,250 for family coverage.) The permitted benefit reported on Form W-2 includes only newly available amounts. Thus, if the QSEHRA allows carryovers of unused amounts from prior years, any available carryovers wouldn’t be reported.

QSEHRAs are a viable benefits option for some smaller employers. But it’s great that you’re performing due diligence so that you know what you’re getting into before rolling one out. Work closely with your tax and benefits advisors to make the right decision.

© 2019

Published in Healthcare

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