QSEHRA (Qualified Small Employer HRA)

A QSEHRA is a Qualified Small Employer HRA — a specific type of HRA available only to employers with fewer than 50 full-time equivalent employees who don't offer a group health plan. It lets the employer reimburse employees tax-free for individual-market health insurance premiums and qualified medical expenses up to annual limits set by the IRS ($6,150 individual / $12,450 family for 2024).

QSEHRAs were created by the 21st Century Cures Act in 2016 to give small employers a way to help with employee health costs without triggering the ACA's group-plan requirements. All employees must be offered the same terms (with limited variation allowed for family size and age). Employees who receive a QSEHRA and also qualify for premium tax credits on the individual marketplace have their credits reduced by the QSEHRA amount, so the interaction matters. The ICHRA (created later, effective 2020) is more flexible in most respects, so QSEHRA has become less common — but it remains simpler to administer and doesn't require an ACA-affordability analysis, which keeps it attractive for very small employers.

The takeaway: for employers under 50 employees who want to contribute to health costs but don't want to run a group plan, QSEHRA and ICHRA both work — QSEHRA is simpler, ICHRA is more flexible. Compare the two before deciding, or use a broker who's fluent in both.