2021 QSEHRA Limit
For 2021, the QSEHRA Limit is $5,300 (Maximum payments and reimbursements) and $10,700 (Maximum payments and reimbursements, family coverage).
Effective 2021-01-01Source: Rev. Proc. 2020-45 (IRS)Verified 2026-08-29
Compared with 2020
| Item | 2020 | 2021 | Change |
|---|---|---|---|
| Maximum payments and reimbursements | $5,250 | $5,300 | +$50 (+1.0%) |
| Maximum payments and reimbursements, family coverage | $10,600 | $10,700 | +$100 (+0.9%) |
Who it applies to
Small employers that offer a qualified small employer health reimbursement arrangement under IRC § 9831(d) and their employees.
What changed this year, and why
For 2021, the IRS set the maximum annual payments and reimbursements under a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) at $5,300 for self-only coverage and $10,700 for family coverage.
Common questions
- What is a QSEHRA?
- A Qualified Small Employer Health Reimbursement Arrangement is a health reimbursement arrangement available to eligible small employers under IRC § 9831(d).
- What are the 2021 maximum amounts?
- For taxable years beginning in 2021, total payments and reimbursements under a QSEHRA cannot exceed $5,300 for self-only coverage or $10,700 for family coverage.
The four things an arrangement must do to be a QSEHRA
To be a QSEHRA, an arrangement must satisfy four requirements. First, it must be funded solely by the employer - no salary reduction contributions are allowed. Second, it must pay or reimburse medical expenses of the employee or the employee's family members, but only after the employee provides proof of minimum essential coverage. Third, for 2021 the total payments and reimbursements may not exceed $5,300 for self-only coverage, or $10,700 if the reimbursement is for family coverage. Fourth, the arrangement must generally be provided on the same terms to all eligible employees, although the employer may exclude certain categories of workers. A QSEHRA is not treated as a group health plan and so is not subject to group health plan rules. Reimbursements to an employee who maintains minimum essential coverage are generally excluded from the employee's gross income.
A QSEHRA is an arrangement that meets all the follow- ing requirements.
Publication 15-B (2021), Employer's Tax Guide to Fringe Benefits (IRS)
Which employers may offer one
To offer a QSEHRA, an employer must meet two conditions. First, the employer 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. Second, the employer must not offer a group health plan to any of its employees. This prohibition includes health reimbursement arrangements (HRAs) and health flexible spending arrangements (FSAs). If an employer offers any group health plan to any employee, even one employee, it cannot establish a QSEHRA. Small employers with fewer than 50 full-time equivalent employees who do not sponsor any group health plan are eligible to provide a QSEHRA to help employees pay for individual health insurance coverage and medical expenses.
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 FSA) to any of your employ- ees.
Publication 15-B (2021), Employer's Tax Guide to Fringe Benefits (IRS)
The same-terms rule, and who may be left out
A QSEHRA must generally be offered on the same terms to all eligible employees. However, the arrangement may exclude certain categories of employees from participation. Specifically, a QSEHRA may exclude employees 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 employees who are nonresident aliens with no earned income from sources within the United States. This same-terms requirement ensures that all participating employees receive equal benefits under the arrangement, while allowing employers to reasonably exclude workers who do not meet minimum eligibility thresholds or who are covered by other collective bargaining arrangements.
completed 90 days of service, employees who haven’t attained age 25 before the beginning of the plan year, part-time or seasonal employees, employ- ees covered by a collective bargaining agreement if health benefits were the subject of good-faith bargain- ing, and employees who are nonresident aliens with no earned income from sources within the United States.
Publication 15-B (2021), Employer's Tax Guide to Fringe Benefits (IRS)
What the employer reports on Form W-2
Employers must report the QSEHRA benefit on employees' Form W-2. The amount reported in box 12 using code "FF" is the total amount of payments and reimbursements that the employee is entitled to receive from the QSEHRA for the calendar year, regardless of how much the employee actually received. For example, if the QSEHRA provides a permitted benefit of $3,000 but the employee only receives reimbursements of $2,000, the employer still reports $3,000 in box 12. This reporting requirement ensures that the IRS can verify that employees do not also claim a premium tax credit for the same coverage period, which would reduce their credit dollar-for-dollar.
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. For example, if your QSEHRA provides a permit- ted benefit of $3,000 and your employee receives reim- bursements of $2,000, on Form W-2, you would report a permitted benefit of $3,000 in box 12 using code “FF.”
Publication 15-B (2021), 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. 2020-45 (IRS)
- Maximum payments and reimbursements
Qualified Small Employer Health Reimbursement Arrangement. For taxable years beginning in 2021, 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 $5,300
- Maximum payments and reimbursements, family coverage
the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $5,300 ($10,700 for family coverage).