The QSEHRA, explained.
The Qualified Small Employer HRA is the original defined-contribution health benefit: companies under 50 employees with no group plan reimburse employees tax-free for coverage they choose — capped by federal limits, governed by one hard deadline, and simpler than its paperwork reputation suggests.
The rules, with citations.
Educational summaries of federal rules — not legal or tax advice.
Who can offer one
Employers with fewer than 50 full-time-equivalent employees that offer no group health plan to any employee. Cross either line and the QSEHRA isn't available — the ICHRA is the arrangement that scales past it.
The 2026 caps
Reimbursements are capped at $6,450 for self-only coverage and $13,100 for family coverage for plan years beginning in 2026 (Rev. Proc. 2025-32). The 2027 figures arrive in the IRS's fall inflation adjustments — a calendar-2027 plan is governed by those, not these.
Same terms for everyone
Unlike an ICHRA's employee classes, a QSEHRA must be offered on the same terms to all eligible employees — amounts may vary only by age and family size. One benefit design, whole company.
What it reimburses
Individual-market premiums and eligible medical expenses — including Medicare and Medigap premiums (Notice 2017-67, Q&A-22). Employees can buy coverage anywhere; no exchange, agent, or particular carrier is required by the arrangement.
Proof of coverage, every time
Employees must have minimum essential coverage and prove it — initial proof by document or attestation, plus an attestation with every reimbursement request (Notice 2017-67, Q&A-41/42). Without MEC, the QSEHRA can't reimburse at all.
The W-2 line
Each employee's permitted benefit is reported on Form W-2, box 12, code FF — the amount they were entitled to receive for the year, not the amount actually reimbursed (Notice 2017-67, Q&A-57).
The 90-day notice: October 3, if your plan continues into 2027.
The deadline
Written notice to each eligible employee at least 90 days before the plan year — October 3, 2026 for a calendar-2027 QSEHRA that's already running. A brand-new QSEHRA follows a different clock: notice by each employee's first day of eligibility (Notice 2017-67, Q&A-37), which is why a new plan can still start mid-year.
The penalty
Late or missing notices run $50 per employee per failure, capped at $2,500 per calendar year, with a reasonable-cause excuse available (§6652(o)). Real, but bounded — the notice is a fill-in exercise, not a crisis.
What the notice must say
Three things: the employee's permitted benefit for the year, an instruction to report it when applying for marketplace subsidies, and the warning that going uncovered means taxable reimbursements and possible individual-mandate exposure where states impose one (§9831(d)(4)).
QSEHRA questions, answered plainly.
What does QSEHRA stand for, and who is it for?
Qualified Small Employer Health Reimbursement Arrangement — created by the 21st Century Cures Act (2016) for companies with fewer than 50 full-time-equivalent employees that offer no group plan. It reimburses employees tax-free for individual coverage and medical expenses, up to federal caps.
What are the QSEHRA contribution limits for 2026?
$6,450 for self-only and $13,100 for family coverage, for plan years beginning in 2026, per Rev. Proc. 2025-32. The 2027 limits haven't been published yet — they arrive in the IRS's fall inflation-adjustment revenue procedure, and a calendar-2027 plan year uses those.
How does a QSEHRA affect marketplace subsidies?
It's a two-branch rule (§36B(c)(4)): if the QSEHRA is affordable for an employee, they get no premium tax credit at all for those months; if it's unaffordable, their credit is reduced dollar-for-dollar by the permitted benefit. Either way the notice is how employees find out — which is why the notice deadline matters.
Can a QSEHRA reimburse Medicare premiums?
Yes — Medicare and Medigap premiums are reimbursable (Notice 2017-67, Q&A-22), though an arrangement can't be limited to only Medicare-eligible employees without running into the same-terms requirement.
When should a company pick an ICHRA instead?
When it's growing past 50 employees, wants different allowances for different classes, needs the offer to satisfy the employer mandate, or wants a budget above the QSEHRA caps. The full comparison is at insurf.io/ichra/vs-qsehra — the QSEHRA is the capped small-company rung of the same defined-contribution ladder.
What does Insurf do for a QSEHRA?
The paperwork and the rails: the plan document, the 90-day notice with the three required items, MEC-proof and substantiation capture, and the W-2 code FF export — with reimbursements running on your own payroll and you giving final approval on every claim. Insurf never holds funds and never makes the final call.
Small company, real benefit, one deadline.
Insurf, Inc. is not a licensed insurance agency, does not sell insurance, and receives no commissions; enrollment applications, where employees want help, are submitted by an individually licensed insurance producer. This page is an educational overview — not an offer of coverage, not a recommendation to buy any plan, and not financial, tax, legal, medical, coverage, or insurance advice. Dollar figures are 2026 limits; 2027 figures arrive in the IRS's fall inflation adjustments.