Employers offering a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) must meet two key tax reporting obligations:
- Form W-2 – Reporting QSEHRA benefits for employees
- Form 720 – Filing for the Patient-Centered Outcomes Research Trust Fund (PCOR) fee
Reporting QSEHRA Benefits on Form W-2
Employers must report the permitted QSEHRA benefit for each employee on Form W-2 in Box 12, using Code "FF." This amount represents the maximum reimbursement the employee could receive during the year, regardless of the actual amount reimbursed.
Key Considerations
- Age and Family Status: If the QSEHRA benefit varies based on factors such as family size or age, the reported amount reflects the benefit available to the employee, provided they submit proof of Minimum Essential Coverage (MEC). Without proof of MEC, the reported amount must reflect the highest possible benefit the QSEHRA could offer them.
- Partial-Year Eligibility: For employees who become eligible partway through the year, the reported benefit is prorated based on their eligibility period.
Examples
- Susan’s Benefit: Susan’s permitted QSEHRA benefit for the calendar year is $3,000, but she received only $1,000 in reimbursements. Her Form W-2 will still report a permitted benefit of $3,000 in Box 12 with Code "FF."
- John’s Benefit: John’s QSEHRA benefit is $3,000 annually, but since he became eligible on May 1, his prorated benefit is $2,000 ($3,000 × 8/12). His Form W-2 will reflect $2,000 in Box 12 with Code "FF."
Exclusions
- Carryovers from unused QSEHRA funds in previous years are not included in the current year’s Form W-2 reporting.
Filing Form 720 for the PCOR Fee
Employers sponsoring QSEHRAs must file Form 720 (Quarterly Federal Excise Tax Return) annually to pay the Patient-Centered Outcomes Research Trust Fund (PCOR) fee.
Details
- Due Date: Form 720 is due by July 31 of the year following the end of the plan year.
- Calculation and Payment: Employers must calculate the fee based on the average number of covered lives under the QSEHRA.
For 2024 plan years, the fee is $3.22 per covered life for plan years ending on or after October 1, 2023, but before October 1, 2024.
For more detailed information, see the IRS Instructions for Form 720.
Salusion's Role in QSEHRA Tax Reporting
Salusion simplifies QSEHRA tax reporting with timely reminders and data support:
W-2 Reporting
- In early December, Salusion emails employers a reminder to update employee W-2s with QSEHRA benefit details. An Excel file with the required data for Box 12 (Code "FF") is included.
PCOR Fee Reporting
- In early July, Salusion emails employers a reminder with instructions for filing Form 720 and an Excel file including the average number of covered lives for the PCOR fee.
