Eligible Employers
To offer a QSEHRA, employers must meet both of the following requirements:
- Not an ALE: The employer must not be an Applicable Large Employer (ALE) as defined under Code §4980H.
- No Group Health Plan: The employer must not offer a group health plan to any employees, including plans with excepted benefits.
Controlled Group Rules
ALE status is determined on a controlled group basis under Code §4980H. For an employer to qualify:
- The controlled group, including the QSEHRA sponsor, must collectively have fewer than 50 full-time-equivalent employees in the prior calendar year.
- If an employer exceeds the 50-employee threshold for the first time during a calendar year, they remain eligible to sponsor a QSEHRA until January 1 of the following year.
- An employer is ineligible for any month in which a group health plan is offered to employees, even if it provides coverage for only part of the month. This applies to all controlled group members.
Definition of Group Health Plan for QSEHRA Purposes
While the statutory definition of a group health plan excludes certain excepted benefits (e.g., limited-scope dental and vision plans), IRS guidance expands the definition for QSEHRA purposes to include:
- Major medical coverage
- Health FSAs and HRAs
- Plans offering only excepted benefits (e.g., limited-scope dental and vision plans, indemnity coverage)
Additionally, employer endorsement of specific individual health insurance policies can result in those policies being treated as a group health plan.
Exceptions
The following will not disqualify an employer from offering a QSEHRA:
- Contributions to an HSA or permitting employees to make pre-tax HSA contributions through a cafeteria plan
- Amounts accumulated in an HRA or health FSA from prior years, provided that access to those funds is suspended during the QSEHRA coverage period.
