QUESTION: Our company is considering offering a qualified small employer health reimbursement arrangement (QSEHRA) next year. Will we be required to report any information about this benefit on employees’ Forms W-2?
ANSWER: Yes. If an employee was covered under a qualified small employer health reimbursement arrangement (QSEHRA), the employer must report the total amount of the employee’s permitted QSEHRA benefit on Form W-2 in Box 12, using Code “FF” (see our Checkpoint article). As background, QSEHRAs are a type of HRA that first became available in 2017. Unlike other HRAs, QSEHRAs are not considered group health plans for most purposes, and they can be offered only by employers that do not offer a group health plan and are not applicable large employers (as defined in Code § 4980H) (see our Checkpoint article). Note that HRAs that are not QSEHRAs are subject to separate Form W-2 reporting requirements under health care reform—see our Checkpoint article.
IRS guidance clarifies that an employer must report the amount of payments and reimbursements that the eligible employee is entitled to receive from the QSEHRA for the calendar year (the employee’s “permitted benefit”), without regard to the payments or reimbursements actually received. (For 2018, the maximum permitted benefit for an eligible employee under a QSEHRA is $5,050 for self-only coverage and $10,250 for family coverage—see our Checkpoint article.) The permitted benefit reported on Form W-2 includes only newly available amounts. Thus, if the QSEHRA allows carryovers of unused amounts from prior years, any available carryovers would not be reported.
For more information, see EBIA’s Consumer-Driven Health Care manual at Section XXVII.E.2 (“QSEHRAs: Form W-2 Reporting”). See also EBIA’s Health Care Reform manual at Section XXXVI.B.3 (“‘Applicable Employer-Sponsored Coverage’ Subject to Reporting”). You may also be interested in our recorded webinar “QSEHRAs and HRAs: Latest Developments” (recorded on 3/21/18).
Contributing Editors: EBIA Staff.