The law governing Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) requires that a written notice of the availability of the QSEHRA be provided to each eligible employee at least 90 days before the beginning of each year. While special rules for 2017 and 2018 allowed for later deadlines (since QSEHRAs were new and the rules were still being developed), no special deadline is available for a QSEHRA providing benefits in 2019. Therefore, an employer providing a QSEHRA for 2019 must provide the written notice no later than October 3, 2018.
In the case of an employee who is not eligible to participate in the QSEHRA at the beginning of the year (e.g., an employee hired during the year), the notice must be provided no later than the date the employee becomes eligible to participate. Thus, an employer maintaining a QSEHRA should have procedures in place to ensure that timely delivery of the notice is accomplished with respect to all new employees.
The law imposes a penalty of $50 per employee (up to a maximum of $2,500 per employer per year) for failure to provide the notice in a timely manner. Therefore, any employer who maintains a QSEHRA should be sure to have reminders in place to ensure that the notice requirement is not overlooked for any year.
IRS guidance confirms that electronic media (e.g., email) may be used to deliver the QSEHRA notice. (See Treasury Regulation Section 1.401(a)-21 for more details regarding electronic delivery of notices pertaining to employee benefit plans, including QSEHRAs.)
The information required to be provided via the annual QSEHRA notice includes (a) a statement of the amount of the benefit for which the employee is eligible, (b) a statement that the employee must inform any Marketplace (e.g., the federal Marketplace at www.HealthCare.gov) to which the employee applies for advance payments of the premium tax credit of the amount of the available QSEHRA benefit, and (c) a statement that if the employee does not have “minimum essential coverage” for any month, reimbursements under the QSEHRA will be included in taxable income. (Since the individual shared responsibility payment under the Affordable Care Act was repealed for years after 2018, references to potential liability for that payment can be omitted from notices for 2019 and subsequent years.)
Adjusted Dollar Limits
The applicable QSEHRA dollar limits for a year are not expected to be published until mid-October of the prior year, and therefore will not be known until after the due date of the annual notice. For this reason (and subject to the terms of the QSEHRA plan document), an employer is permitted to use the limits for the prior year (e.g., $5,050 for single coverage and $10,250 for family coverage for 2018) to determine benefits for the new year. For a QSEHRA that uses the actual indexed limits for the year, it is suggested that the employer make reference to the prior year limits, and then issue a supplemental notice after the actual limits have been published.