Qualified Small Employer Health Reimbursement Arrangement



Additional Facts

Plan Year (Period of Coverage)


Typically, employers choose to run the HRA concurrent with their health insurance plan year; this co-cycle is not mandatory and the HRA plan year may be independent of the health insurance plan year. Short plan years are generally available as well, depending on the options provided by the plan administrator.




With an HRA, unused fund amounts may be carried over from year to year. This differs from a Flexible Spending Account which maintains the "use-it-or-lose-it" rule.


Employers have full discretion over how the carryover is managed. They may choose to allow the employee to keep all or only a portion of unused funds for use in later years, or may require forfeiture of all fund balances after the close of the plan year.




All requests for reimbursement under an HRA must be substantiated. The most common means of substantiation is the EOB statement provided by the employee's health insurance provider after a medical expense has been incurred.


Since the HRA typically pays for out-of-pocket expenses up to the amount of the health insurance deductible, employees must reference the EOB statement to ascertain what has and has not been covered by insurance for a specific medical expense occurrence. They then request reimbursement for the portion of the expense that was not paid by their insurance plan.


For other out-of-pocket expenses, a copy of a receipt or bill identifying the date of service, amount of service, and the name of the service provider is normally required to substantiate requests for reimbursement.


Coordination with Health Savings Accounts


Employer contributions to a health savings account that are part of a Section 125 (cafeteria) plan can continue be made without jeopardizing employer eligibility for a QSEHRA.  However, if the QSEHRA coverage is not HSA-compatible, an employee will lose HSA eligibility.


Penalties for non-compliance  


Any violations relating to the QSEHRA rules could result in the IRC Section 4980D penalties of up to $100 per day, per participant.