IRS Announces QSEHRA Contribution Limits
QSEHRA contribution limits have been announced by the IRS. Slightly higher than last year, these HRA reimbursement limits represent the maximum amount an employer can reimburse their employees for health insurance using the Qualified Small Employer HRA.
Updated October 2022 with 2023 rates!
As a reminder, Qualified Small Employer HRAs (QSEHRAs, for short) allow small business owners to reimburse their employees for health premiums and qualified medical expenses. QSEHRA is available to companies with less than 50 full time equivalent employees and, unlike the Individual Coverage HRA, it has its limits in terms of monthly reimbursement rates.
Employers looking to set their benefits budgets for 2021 now have the information they need.
All reimbursements are subject to annual maximums and become available to employees on a monthly basis. This means employees can’t take the full annual amount in January—instead, the funds become available to employees each month. Although if they do submit a medical expense that exceeds their reimbursement limits, they can be paid out on a monthly basis.
→ Read all about the state of the 2021 ACA Market here.
What are the 2023 QSEHRA contribution limits?
Changes in annual QSEHRA rates are typically tied to inflation, so we expect them to go up a little bit every year. In fact, since its inception, we’ve seen a steady increase annually of about $100 for individuals and $150-200 for families.
QSHERA 2023 Limits
For 2023, businesses with less than 50 employees can contribute a maximum of $5,850 for individual employees (this adds up to $487.50 per month) and a contribution of $11,800 for employees with a family (this adds up to $983.33 per month).
These QSEHRA contribution limits have gone up since last year! Compared to 2022, 2023 QSEHRA limits have increased by $400 for individual employees and $750 for employees with a family annually.
On a monthly basis, that means $33.33 more each month for individuals to pay toward their healthcare costs and $62.50 for families to use toward healthcare costs. Not bad!
The 2020 QSEHRA contribution rates were as follows:
Individual $5,250/ Annually ($437.50/month)
Family $10,600/ Annually ($883.33/month)
The 2021 QSEHRA limits have now been announced:
Individual $5,300 / Annually ($441.67/month)
Family $10,700 / Annually ($891.67/month)
The increase in the QSEHRA annual limit is in line with the increases we’ve seen in the past.
2022 limits:
Individual$5,450/ Annually ($454.16/ Monthly)
Family: $11,050/ Annually ($920.83/ Monthly)
What if I want to reimburse my employees more than the annual QSEHRA contribution limit?
For some businesses, depending on local market factors and their company makeup, monthly QSEHRA limits work great for their employees to be able to choose a quality MEC plan. For some employers, however, they want to offer more than the QSEHRA contribution limit.
For those folks, there’s a new HRA called the Individual Coverage HRA that has no contribution limits. It’s worth checking out if the limits are a concern. Again, what’s best for one business isn’t necessarily the best for another. Our team is on hand to help guide you through this decision!
We’re here to help!
Our team is here to make setting up an HRA for your business quick, easy, and headache-free. Our team will help you set your budget, take care of the admin paperwork, and help your employees pick a plan that suits their needs. From there, we do the heavy lifting! In fact, 84% of our clients report that they spend less than an hour each month administering their HRA.
For an in-depth look at the QSEHRA, check out our guide or QSEHRA FAQ page!
