The new W2 includes a new Box 12 Code FF, which will be used to designate Permitted Benefits Under a Qualified Small Employer Health Reimbursement Arrangement.
Employers should use this code FF to report in box 12 any amounts of benefits allowable under a QSEHRA. The maximum reimbursement for an eligible individual employee under a QSEHRA is $4,950 for tax year 2017, or $10,000 if the benefit includes reimbursements for family members, too. These amounts will be indexed for inflation in future tax years.
A newer part of the Affordable Care Act provisions, a QSEHRA is an option that may be offered beginning 1/1/2017 where an employer:
- Is not an ALE (applicable large employer) under ACA guidelines
- Does not offer a group health plan to any employees
In this type of arrangement, the small employer may now, without penalty, reimburse full time employees for the total cost of buying their own individual Minimum Essential Coverage health insurance policies and/or other eligible, documented medical expenses like copays, deductibles, vision and dental expenses. The QSEHRA plans will not be subject to COBRA or ERISA, as they are not considered group insurance plans.
Third party administrators will likely be good sources for information on 2017 QSEHRA plans. Employers will have to send notices to qualified employees by March 12, 2017 to inform them of 2017 QSEHRA plans, and inform new employees as they become eligible.
There are also some administrative requirements that employers must take care of 90 days before they can implement a new plan year:
1. Notify employees of the amount in the QSEHRA benefit.
2. Instruct employees to contact the exchange of the QSEHRA if they plan to apply for a tax subsidy.
3. Explain in writing to employees the consequences of not purchasing MEC (i.e. having their reimbursements included in taxable income)
4. Make clear to participants that all reimbursements will require proof of coverage.