Why Your Company Should Offer Both an HSA and a QSEHRA
By: Caitlin Bronson, Zane Benefits, January 2018
The opportunity to offer personalized health benefits is growing. Over the years, new tax-free vehicles have emerged, and small businesses now have multiple ways to increase employees’ benefits.
Two of the most popular personalized health benefits are health savings accounts (HSAs) and qualified small employer health reimbursement arrangements (QSEHRAs). These two benefits fulfill different functions, but they’re both valuable, and—arranged correctly—they can be used together to create a standout health benefits package for employees.
Many small businesses are confused over their options, though. Questions on HSAs and QSEHRAs are common, particularly on how the two compare and whether businesses should offer them together.
In this post, we’ll go over the differences between an HSA and a QSEHRA, how they can work together, and why a small business should consider offering both at the same time.
What’s the difference between an HSA and a QSEHRA?
One of the first questions small businesses have is how the HSA and the QSEHRA compare.
Let’s start with a basic explanation of each.
A health savings account (HSA) is a financial account established by an individual to pay for qualified medical expenses. HSAs must be linked with a qualified high-deductible health insurance plan (HDHP), and while the HSA is owned solely by the employee, both the employee and the business can contribute to it. Contributions to HSAs are tax-free.
A qualified small employer health reimbursement arrangement (QSEHRA), meanwhile, is an arrangement that small businesses use to reimburse employees’ qualified medical expenses. Funds don’t accumulate in a separate account; instead, businesses pay only after their employees incur expenses and submit documentation. The QSEHRA can’t work in conjunction with a group health insurance policy, and the business is the only party that makes payments. QSEHRA payments are tax-free to the business and can also be tax-free to employees, as long as the employees have minimum essential coverage (MEC).
Both the HSA and the QSEHRA allow businesses to contribute tax-free money to employees for qualified medical expenses. However, there are large points of difference between the two relating to eligibility, ownership, and contribution requirements.
The following chart explores those differences. Continue to Zane Benefits
