2018 QSEHRA Limit
For 2018, the QSEHRA Limit is $5,050 (Maximum payments and reimbursements) and $10,250 (Maximum payments and reimbursements, family coverage).
Effective 2018-01-01Source: Rev. Proc. 2017-58 (IRS)Verified 2026-08-29
Compared with 2017
| Item | 2017 | 2018 | Change |
|---|---|---|---|
| Maximum payments and reimbursements | $4,950 | $5,050 | +$100 (+2.0%) |
| Maximum payments and reimbursements, family coverage | $10,050 | $10,250 | +$200 (+2.0%) |
Who it applies to
Small employers that maintain a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) under IRC § 9831(d) and their employees for tax years beginning in 2018.
What changed this year, and why
For tax years beginning in 2018, the maximum amount of payments and reimbursements under a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is $5,050 for self-only coverage and $10,250 for family coverage. These amounts, set under IRC § 9831(d), are adjusted annually for inflation.
Common questions
- What is a QSEHRA?
- A QSEHRA is a Qualified Small Employer Health Reimbursement Arrangement under IRC § 9831(d), created by the 21st Century Cures Act. It allows eligible small employers to reimburse employees for medical expenses and individual health insurance premiums on a pre-tax basis.
- What must a QSEHRA provide regarding maximum payments and reimbursements?
- The arrangement must provide that the total amount of payments and reimbursements for any employee cannot exceed $5,050 for self-only coverage or $10,250 for family coverage in 2018.
The four things an arrangement must do to be a QSEHRA
To qualify as a QSEHRA, an arrangement must satisfy four conditions. First, the employer alone must fund it; employees cannot make salary-reduction contributions. Second, the arrangement pays or reimburses medical expenses for the employee or family members, but only after the employee provides proof of minimum essential coverage. Third, payments and reimbursements may not exceed the annual limit - in 2018 the cap is $5,050 for self-only coverage or $10,250 for family coverage. Fourth, the arrangement must generally be offered on the same terms to every eligible employee, although certain groups may be excluded. If any of these requirements is not met, the arrangement does not qualify as a QSEHRA.
A QSEHRA is an arrangement that meets all the follow- ing requirements.
Publication 15-B (2018), Employer's Tax Guide to Fringe Benefits (IRS)
Which employers may offer one
Only small employers may establish a QSEHRA. To be an eligible employer, you must not be an applicable large employer, which is defined as an employer that, generally, employed at least 50 full-time employees, including full-time equivalent employees, in the prior calendar year. In addition, the employer must not offer a group health plan to any of its employees. This includes health reimbursement arrangements and health flexible spending arrangements. An employer that fails either condition cannot maintain a QSEHRA, and the arrangement would not qualify for the favorable tax treatment available to QSEHRAs.
To be an eligible employer, you must not be an applicable large employer, which is de- fined as an employer that, generally, employed at least 50 full-time employees, including full-time equivalent employ- ees, in the prior calendar year.
Publication 15-B (2018), Employer's Tax Guide to Fringe Benefits (IRS)
The same-terms rule, and who may be left out
A QSEHRA must generally be provided on the same terms to all eligible employees. However, the employer is permitted to exclude certain categories of workers from the arrangement. Excludable employees include those who have not completed 90 days of service, those who have not attained age 25 before the start of the plan year, part-time or seasonal employees, employees covered by a collective-bargaining agreement if health benefits were the subject of good-faith bargaining, and nonresident aliens who have no earned income from sources within the United States. These exclusions are optional; an employer may choose to include any of these groups. The key requirement is that all employees who are not excluded must be offered the arrangement on the same terms, meaning the same dollar amount is made available to each.
However, your QSEHRA may exclude employees who haven’t com- pleted 90 days of service, employees who haven’t at- tained age 25 before the beginning of the plan year, part-time or seasonal employees, employees covered by a collective bargaining agreement if health benefits were the subject of good faith bargaining, and em- ployees who are nonresident aliens with no earned in- come from sources within the United States.
Publication 15-B (2018), Employer's Tax Guide to Fringe Benefits (IRS)
What the employer reports on Form W-2
Each year the employer must report the QSEHRA benefit on the employee's Form W-2. The amount reported in box 12, using code "FF", is the total permitted benefit the employee is entitled to receive for the calendar year - not the amount actually reimbursed. For example, if the QSEHRA provides a certain permitted benefit amount but the employee only submits claims for a lesser amount, the employer must still report the full permitted benefit amount that was available. This informational reporting lets the IRS and the employee know the full benefit available and is necessary because the amount reported affects whether the employee can claim the premium tax credit. The reported amount does not itself make the benefit taxable.
Reporting requirements. You must report in box 12 of Form W-2 using code “FF” the amount of payments and reimbursements that your employee is entitled to receive from the QSEHRA for the calendar year without regard to the amount of payments or reimbursements actually re- ceived.
Publication 15-B (2018), Employer's Tax Guide to Fringe Benefits (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Rev. Proc. 2017-58 (IRS)
- Maximum payments and reimbursements
Qualified Small Employer Health Reimbursement Arrangement. For tax years beginning in 2018, to qualify as a qualified small employer health reimbursement arrangement under § 9831(d), the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $5,050
- Maximum payments and reimbursements, family coverage
the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $5,050 ($10,250 for family coverage).