2025 QSEHRA Contribution Limits and Rules

Employer-sponsored healthcare insurance has always been a cornerstone of the American healthcare system, with employees continuing to rank health benefits as one of their top priorities when choosing a job, even now in 2025. However, the issue is that traditional group coverage options have always been relatively expensive, especially for smaller employers looking to be competitive in today’s job market.

If this has been your experience when trying to keep up with traditional health benefits options, you’re not alone. In response to the needs and unique challenges facing firms of this size, the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) was established in 2017. With this type of HRA, companies with fewer than 50 employees who don’t currently offer a group health plan have an affordable, flexible way to contribute to their employees’ health care costs.

But in order for small businesses to reap the full advantages of a Qualified Small Employer HRA, employers must stay up-to-date with the contribution limits and rules set by the United States (U.S.) Internal Revenue Service (IRS) at the start of each year.

In this article, we’ll cover the QSEHRA contribution limits set for 2025 and other important rules to help you make the most of this HRA.

After reading, you’ll understand:

• The definition and purpose of a Qualified Small Employer Health Reimbursement Arrangement
• The 2025 limits for employer contributions into a QSEHRA plan
• Key rules and compliance requirements to maintain eligibility for a QSEHRA
• How a QSEHRA can provide advantages for your small business, particularly when combined with Direct Primary Care (DPC)

What is a Qualified Small Employer HRA?

The QSEHRA is a type of health reimbursement arrangement (HRA), which you can think of as a tax-advantaged employer-funded expense account that can be used to reimburse employees for eligible healthcare costs, including premiums on an insurance plan of their choice. Like the name suggests, the Qualified Small Employer HRA is specifically designed for any organization with less than 50 full-time equivalent (FTE) employees looking for an affordable way to offer small business medical benefits.

This can be a much more suitable alternative to traditional group health plans for smaller companies because it offers employers and employees greater financial control and customizability to fit their particular needs.

QSEHRA Reimbursement Process

Small employers can decide what they'll contribute to their employees’ health care costs, up to an annual maximum set by the IRS (see below). Employees pay their provider or insurance company for their health care costs, then submit proof of payment to be reimbursed by the QSEHRA using tax-free dollars up to their allowance amounts. While the employer is responsible for the reimbursement budget, an HRA administrator like Vitable, manages this process on the employer’s behalf, handling documentation, compliance, and disbursements.

To make it even easier, Vitable’s ICHRA debit card can be used to streamline eligible purchases, allowing employees to pay for healthcare expenses like therapy, prescriptions, fertility care, and more. It's a flexible, frictionless way for your team to use their benefits whenever and however they need them.

2025 Qualified Small Employer HRA Contribution Limits

In October 2024, the IRS published the 2025 limits for several types of benefit plans, including the QSEHRA plan, in their IRS Revenue Procedure 2024-40. For taxable years beginning in 2025, small employers can contribute up to:

• $6,350 yearly for single employees ($529.16 per month)
• $12,800 yearly for family coverage ($1,066.66 per month)

Although these limits represent the total amount of payments and reimbursements that can be offered through a QSEHRA, employers can also choose to set their contributions to be lower than the allowed maximum, depending on their budget.

Compared with 2024, the current limits represent a $200 annual increase (3.25%) for single employees and a $350 annual increase (2.81%) for family coverage. Overall, the annual QSEHRA employer contribution limits for both individuals and families have increased each year since 2022, as shown in the table below.

Rules and Requirements for QSEHRA in 2025

QSEHRA plans operate on a simple premise: employers reimburse, employees choose. To qualify for these small business medical benefits, the following rules and requirements must be met by small employers and their employees:

Employees must be enrolled in a health plan that meets Minimum Essential Coverage (MEC), as defined by the Affordable Care Act (ACA), in order to qualify for tax-free reimbursement through a QSEHRA because that’s what the IRS requires to maintain the tax-advantaged status of the benefit. MEC refers to a health insurance plan that meets the Affordable Care Act's (ACA) basic coverage requirements. This includes most employer-sponsored plans, individual plans purchased through the ACA Marketplace, and certain government programs such as Medicaid or Medicare.

Without MEC, any QSEHRA reimbursements the employee receives would be treated as taxable income, which defeats the purpose of using a QSEHRA to provide a tax-free benefit. Requiring MEC ensures that employees have a baseline level of health coverage while allowing employers to offer meaningful, tax-efficient support for their healthcare costs.

Examples of QSEHRA-eligible, tax-free reimbursements include:

• Monthly insurance premiums
  • For individual ACA plans, Medicare Parts B and D, Medicaid (where premiums apply), dental or vision insurance, and—in some cases—a spouse’s group health plan (as a taxable benefit if the plan isn’t MEC)
• Prescription drugs and certain over-the-counter medicines (must be medically necessary; some may require a doctor’s note)
• Dental or vision coverage
• Preventive care services (e.g., screenings, immunizations)
• Mental health services
• Alternative treatments
  • E.g., acupuncture, chiropractic care, dietitian or nutritionist services (if medically necessary), etc.

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