QSEHRA: 2026 limits and how it works

2026 QSEHRA limits

Self-only

$6,450 a year$537.50 a month

Family

$13,100 a year$1,091.67 a month

Set by

Rev. Proc. 2025-32IRS, 2026 inflation adjustments

Group plan allowed?

Nofor any employee

The caps are the most you can reimburse in the year. You can set a lower allowance. A family allowance only applies to employees who have family coverage; everyone else is held to the self-only cap.

Who can offer a QSEHRA

A QSEHRA (qualified small employer health reimbursement arrangement) is defined in 26 USC 9831(d). To offer one, all of these must be true:

• You are a small employer. You cannot be an applicable large employer under the ACA employer rules, which means fewer than 50 full-time employees, counting full-time equivalents.
• You offer no group health plan to any employee. A company with a group plan for some staff needs an ICHRA instead.
• Only you fund it. Employees cannot add pre-tax salary to the account.
• Everyone eligible gets the same terms. You cannot give managers a bigger allowance than hourly staff.
• Employees have minimum essential coverage before you reimburse them.

What a QSEHRA costs at 5, 10 and 25 employees

Your maximum yearly cost is the cap times the people who use it, plus the administrator's fee. Here is the ceiling if every eligible employee used the full 2026 amount:

No QSEHRA administrator's price was in our research on October 16, 2026, so add the per-employee fee from your quote. If you are weighing the QSEHRA against a raise, put the raise through the employee cost calculator so employer payroll taxes are included; the rates it uses are on our 2026 payroll tax rate table.

QSEHRA or ICHRA: a decision table

The full ICHRA rule set, including the 3x age band and the 90-day notice, is on our ICHRA page.

How a QSEHRA works, step by step

1. Confirm you qualify: small employer, no group health plan.
2. Set the allowance at or below $6,450 self-only and $13,100 family for 2026.
3. Give written notice to eligible employees before the plan year. Our reading of the statute is a 90-day lead time for most employers; confirm the deadline with your administrator.
4. Employees buy their own coverage and submit proof of premiums and medical costs.
5. Reimburse through payroll or your administrator, up to the allowance.
6. Keep records of coverage proof and every reimbursement.

If you are still setting up payroll, start with hiring your first employee so state accounts and new-hire reporting are in place.

QSEHRA vs joining a PEO health plan

A PEO is the other common route for very small teams that want health benefits without buying a group plan alone. The PEO fee is published at Justworks: $124 per employee per month for PEO Plus, which adds medical, dental and vision administration, with premiums not shown as included (pricing page, checked October 16, 2026). For 10 employees that fee alone is $14,880 a year ($124 x 10 x 12) before any premium.

A QSEHRA has no PEO fee, but employees shop the individual market themselves and your contribution is capped. PEO plans can give access to larger-group options; reviewers also report renewals rising 8% to 18% a year at ADP TotalSource (Capterra reviews from May 2024 and April 2025, more than a year old). Compare both with what a PEO costs in total and our PEO rankings, and see every route in the small business health insurance guide.

Common QSEHRA mistakes

• Setting the allowance above the cap. For 2026 the limits are $6,450 and $13,100.
• Keeping a group plan for a few people. Any group health plan rules out a QSEHRA.
• Different amounts by job. Eligible employees get the same terms; use an ICHRA if you need classes.
• Paying before seeing proof of coverage. Collect it first.
• Using last year's numbers. The caps change each year with inflation.

Planning retirement benefits too? See 401(k) options for small businesses.