By Using a QSEHRA (small business HRA) is a tax-friendly option to offer affordable, personalized benefits for your staff. But what about for those living abroad? Well, that’s a bit of a gray area. The instability in Washington and the fate of the Affordable Care Act only makes matters more confusing. Since we’ve been getting more and more questions on this topic, we’ve done a lot of research in this area. In our professional opinion, yes, you can reimburse for overseas medical expenses with a QSEHRA. Bear in mind that we are not licensed tax professionals, so we always recommend consulting with your CPA before making any final decisions for your company.
Here’s what we know about QSEHRA and living abroad. If you and your CPA believe you meet the criteria below, then you shouldn’t have any trouble using a QSEHRA for reimbursing medical expenses for teammates abroad.
Do you qualify?
If you live in the US at least 329 days of the year and pay taxes here, you are still required to obtain minimum essential coverage (MEC) for each month. In that spirit, because you have healthcare coverage through a United States insurance plan, said plan should fall under reimbursement guidelines for a small business HRA.
The law requires each participant maintain the MEC as defined in IRC Code 5000A. Specifically referring to US citizens living overseas, the code states:
“(4) Individuals residing outside United States or residents of territories.
Any applicable individual shall be treated as having minimum essential coverage for any month—(A) if such month occurs during any period described in subparagraph (A) or (B) of section 911(d)(1) which is applicable to the individual, or (B) if such individual is a bona fide resident of any possession of the United States (as determined under section 937(a)) for such month.
Looking at the reference above, IRC Section 911(d)(1) states:
(d) Definitions and special rules.
For purposes of this section—(1) Qualified individual The term “qualified individual” means an individual whose tax home is in a foreign country and who is—(A) a citizen of the United States and establishes to the satisfaction of the Secretary that he has been a bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year, or(B)a citizen or resident of the United States and who, during any period of 12 consecutive months, is present in a foreign country or countries during at least 330 full days in such period.”
Take Command Health is here to help
We are here to help you understand the fine print when it comes to small business HRAs. Set up is easy, and we are here to answer questions along the way.
Hungry for more? Check out the FAQ section in our handy new QSEHRA Guide!
