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John Malone, JD, CTC
June 9, 2023

Boost Your Business with QSEHRA: Unlocking Tax-Free Wealth Strategies

Discover how a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) can help small businesses offer tax-free health benefits to their employees, leading to financial success and tax optimization. In this comprehensive guide, we'll explore the benefits, eligibility, and setup process of QSEHRA.

Learn about how business owners can save significant money, build their tax-free wealth and help their employees with a QSEHRA.

What is a QSEHRA?

A QSEHRA is a health benefit plan designed specifically for small businesses and non-profit organizations with less than 50 full-time employees. It allows employers to set aside a fixed, pre-tax amount of money each month for employees to use towards purchasing individual health insurance or covering medical expenses. This tax-free wealth strategy offers a more efficient and flexible alternative to traditional group health insurance plans, enabling employees to choose the coverage that best suits their needs.

Benefits of QSEHRA for Small Businesses

  • Tax Optimization

By offering a QSEHRA, employers can take advantage of tax benefits such as deductions for contributions made to the arrangement and the exclusion of reimbursements from payroll taxes. Additionally, employees benefit from tax-free reimbursements, which can lead to substantial savings on healthcare costs.

  • Customizable Allowances

Employers have the flexibility to set their own monthly reimbursement allowances, based on factors such as employee status (full-time/part-time) and family size, ensuring a tailored approach to providing health benefits that fit within the organization's budget.

  • Employee Satisfaction

With QSEHRA, employees have the freedom to choose individual health insurance plans that best meet their needs, rather than being limited to a single group plan. This flexibility can lead to increased satisfaction and retention among your workforce.

QSEHRA Eligibility Criteria

  • For Employers

Small businesses and non-profit organizations with fewer than 50 full-time employees are eligible to offer a QSEHRA. However, they must not currently provide a group health insurance plan, flexible spending account (FSA), or any excepted benefits (such as dental or vision coverage).

  • For Employees

All full-time employees are automatically eligible for QSEHRA benefits, while part-time employees can be included at the employer's discretion. Certain exclusions may apply to seasonal workers, employees under 25 years of age, and those with less than 90 days of employment.

Setting Up a QSEHRA

  • Step 1: Determine Reimbursement Allowances

First, employers must decide on the monthly reimbursement amounts for their employees, ensuring that allowances are consistent among employees with similar status and family size. Keep in mind that the IRS sets annual contribution limits, which may change each year.

  • Step 2: Establish Legal Plan Documents

Next, create the necessary legal plan documents outlining the terms and conditions of your QSEHRA, such as reimbursement allowances, eligible expenses, and employee eligibility criteria.

  • Step 3: Select a Start Date

Choose a start date for the QSEHRA, ensuring that it falls within open enrollment to facilitate smooth employee transitions to individual health insurance plans.

  • Step 4: Notify Employees

Inform all eligible employees about the QSEHRA and provide any necessary enrollment information. Failure to do so within the required timeframe may result in penalties.


A QSEHRA offers small businesses a powerful tool for providing tax-free wealth benefits to their employees, leading to increased satisfaction, retention, and financial success. By working with a tax strategist near you, optimizing your tax strategy, and utilizing wealth strategies, your small business can thrive in today's competitive market. To delve deeper into the realm of QSEHRA and other tax optimization strategies, we encourage you to reach out to us today.

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