2.8%. That was Colorado’s unemployment rate in July 2018, according to the US Bureau of Labor Statistics.  With such a low unemployment rate, employers must offer competitive benefits to attract and retain qualified employees.  But with large and small employers competing for the same talent pool, how do you, the small business owner, compete?  One way is to offer a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), or Small Business HRA.  Small employers with fewer than 50 full-time equivalent (FTE) employees that do not offer group health insurance to their employees are eligible to offer these health reimbursement arrangements to their employees.  Basically, a QSEHRA is a company-funded benefit that reimburses employees for qualified medical expenses, tax free, up to a set allowance limit.

Why offer a QSEHRA to your employees?

  • Affordability - The employer establishes the employee monthly reimbursement allowance; different allowances can be offered depending on whether the employee is single or married.  There are no minimum contribution requirements.  The 2018 maximum annual contribution limits are $5,050.00 for single employees and $10,250 for married employees.  
  • Flexibility - The employee can choose to spend their allowance on what benefits them the most:
    • Insurance: health, dental, vision, long term care
    • Prescription drugs
    • Copays/Deductibles
    • Healthcare mileage
  • Taxability - Health reimbursements under a QSEHRA are not subject to payroll tax for either the employer or the employee.  *Reimbursements are subject to income tax if an employee is not covered by a health insurance policy providing minimum essential coverage (MEC).
  • Eligibility – Employers can choose to include part-time employees in a QSEHRA.  Employees that have health coverage under a spouse’s policy can still use QSEHRA funds to pay for copay/deductibles and other medical expenses.

As with any benefit paid by an employer on the employees’ behalf, there are certain rules and reporting requirements that have to be followed in order for the benefit to be qualified and exempt from payroll taxes.  Call us today at (970) 353-0170 to find out how Payroll Vault of Weld County can assist with a QSEHRA.


Allyson Rodahl, CPP
Payroll Vault of Weld County
(970) 353-0170