2020 QSEHRA Limit
For 2020, the QSEHRA Limit is $5,250 (Maximum payments and reimbursements) and $10,600 (Maximum payments and reimbursements, family coverage).
Effective 2020-01-01Source: Rev. Proc. 2019-44 (IRS)Verified 2026-08-29
Compared with 2019
| Item | 2019 | 2020 | Change |
|---|---|---|---|
| Maximum payments and reimbursements | $5,150 | $5,250 | +$100 (+1.9%) |
| Maximum payments and reimbursements, family coverage | $10,450 | $10,600 | +$150 (+1.4%) |
Who it applies to
Small employers offering a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) and their employees
What changed this year, and why
The IRS set the 2020 maximum payments and reimbursements for a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) at $5,250 for self-only coverage and $10,600 for family coverage. These amounts are adjusted annually for inflation.
Common questions
- What are the maximum payment and reimbursement amounts under a QSEHRA for 2020?
- The maximum is $5,250 for self-only coverage and $10,600 for family coverage.
- How do the 2020 QSEHRA limits compare with 2019?
- In 2019, the limits were $5,150 for self-only coverage and $10,450 for family coverage.
The four things an arrangement must do to be a QSEHRA
A Qualified Small Employer Health Reimbursement Arrangement must satisfy four requirements. First, the arrangement must be funded solely by the employer; no salary reduction contributions are permitted. Second, after an eligible employee provides proof of health coverage, the arrangement may pay or reimburse medical expenses for the employee or the employee's family members. Third, payments and reimbursements for 2020 cannot exceed $5,250 for self-only coverage or $10,600 for family coverage. Fourth, the arrangement must generally be provided on the same terms to all eligible employees, though certain employees may be excluded: those who have not completed 90 days of service, those who have not attained age 25 before the plan year begins, part-time or seasonal employees, employees covered by a collective bargaining agreement if health benefits were subject to good-faith bargaining, and nonresident aliens with no U.S. earned income.
A QSEHRA is an arrangement that meets all the follow- ing requirements. 1. The arrangement is funded solely by you, and no sal- ary reduction contributions may be made under the arrangement. 2. The arrangement provides, after the eligible em- ployee provides proof of coverage, for the payment or reimbursement of the medical expenses incurred by the employee or the employee’s family members. 3. The amount of payments and reimbursements don’t exceed $5,250 ($10,600 for family coverage) for 2020. 4. The arrangement is generally provided on the same terms to all your eligible employees. 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 (2020), Employer's Tax Guide to Fringe Benefits (IRS)
Which employers may offer one
An employer may offer a QSEHRA only if it meets two conditions. First, the employer must not be an applicable large employer, meaning it generally employed fewer than 50 full-time employees (including full-time equivalents) in the prior calendar year. Second, the employer must not offer a group health plan to any of its employees. This prohibition extends to any type of group health plan, including a health reimbursement arrangement or a health flexible spending arrangement. If an employer sponsors any group health plan for any employee, none of its employees can participate in a QSEHRA. An employer that meets both conditions may establish a QSEHRA and make payments or reimbursements up to the annual limits.
Eligible employer. 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. You must also not offer a group health plan (including a health reimbursement ar- rangement (HRA) or a health flexible spending arrange- ment (FSA)) to any of your employees.
Publication 15-B (2020), 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. This means the employer cannot offer different benefit amounts or different eligibility conditions to different employees based on their role, compensation, or other factors. However, the arrangement may exclude certain categories of employees entirely: those who have not completed 90 days of service, employees who have not attained 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 nonresident aliens with no earned income from sources within the United States. These exclusions allow small employers to tailor coverage while maintaining the fundamental requirement that all similarly situated employees receive the same benefit.
The arrangement is generally provided on the same terms to all your eligible employees. 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 (2020), Employer's Tax Guide to Fringe Benefits (IRS)
What the employer reports on Form W-2
Employers must report the amount of payments and reimbursements that an employee is entitled to receive from the QSEHRA for the calendar year on Form W-2. The amount is reported in box 12 using code "FF". Importantly, the employer reports the permitted benefit amount the employee is entitled to receive, not the amount actually reimbursed during the year. This means that even if an employee does not use the full benefit amount available under the arrangement, the employer still reports the full permitted benefit amount on the W-2. This reporting requirement ensures that the IRS has visibility into the tax-free benefit provided to employees and can verify compliance with the annual limits for QSEHRAs.
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 (2020), 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. 2019-44 (IRS)
- Maximum payments and reimbursements
Qualified Small Employer Health Reimbursement Arrangement. For taxable years beginning in 2020, 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 $5,250
- Maximum payments and reimbursements, family coverage
the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $5,250 ($10,600 for family coverage).