How to Set Up and Report a QSEHRA in Patriot Software
A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is a health benefit that lets small employers reimburse employees tax-free for health insurance premiums and medical expenses. If you offer a QSEHRA, the IRS requires you to report each employee's permitted benefit on their Form W-2 in Box 12 using code FF. In Patriot Software, you handle QSEHRA in two parts: a contribution for W-2 reporting, and an optional non-taxable money type if you also want to reimburse employees through payroll.
Set Up a QSEHRA Contribution for W-2 Reporting
Employers are required to report the amount the employee is able to receive from the QSEHRA for the calendar year, without regard to the amount the employee actually received.
Set Up a Company Level Contribution
To report this amount. set up a contribution at the company level.
Go to Payroll > Payroll Settings > Deductions and Contributions
Click Add Contribution
Description - name for your health benefit contribution ex: QSEHRA
Active - keep checked.
For Deduction - leave blank.
Type - Other
Method - Choose fixed dollar
Limits - Leave the limits blank at the company level
W-2 Box - 12 label FF
Click Save.
2. Assign the Contribution to Employees
Go to Payroll > Employee List > {Employee Name} > Deductions and Contributions
Click Add Contribution.
Select the QSEHRA from the drop down.
Add the amount of the benefit amount for each pay in the per payroll
Add the maximum annual amount. For instance, if you are offering your employees with a family plan $6000 for the year, and they are paid weekly enter $6000 in both the payroll and annual amount.
Click Save.
Keep these points in mind when setting up the QSEHRA contribution:
When setting up as a contribution in payroll, it will NOT increase the employee's net pay. The contribution is for W-2 reporting purposes only.
You can apply limits to the QSEHRA contribution when setting it up.
You (the employer) are responsible for determining the reimbursement amount to report for the year based on IRS guidelines.
QSEHRA Reporting Example
A QSEHRA provides a permitted benefit of $3,000 for the year. The employee actually receives $2,000 in reimbursements. On the employee's Form W-2, the employer reports the full permitted benefit of $3,000 in Box 12 using code FF — not the $2,000 actually reimbursed. IRS Notice 2017-67, Q&A 57.
IRS QSEHRA Contribution Limits
The IRS sets annual maximums on QSEHRA benefits. For plan years beginning in 2026, the maximum QSEHRA benefit is $6,450 per year for employee-only coverage and $13,100 per year for family coverage, per IRS Revenue Procedure 2025-32. The IRS adjusts these QSEHRA limits annually for inflation, so check current IRS guidance each plan year.
Reimburse Employees Through Payroll (Optional)
If you also want to use Patriot Software to reimburse employees for QSEHRA expenses, set up a non-taxable money type. A non-taxable money type adds the reimbursement to the employee's pay without withholding taxes.
Do NOT choose a W-2 label when setting up the reimbursement money type.
All QSEHRA W-2 reporting should be done through the contribution described above — selecting a W-2 label on both would cause duplicate reporting.