United States · Federal · Small employer health benefits
QSEHRA limits 2027.
The most a small employer can reimburse under a qualified small employer health reimbursement arrangement in 2027, and how the limit works for part of a year.
Short answer: For 2027 a QSEHRA can pay or reimburse up to $6,700 for an employee with self-only coverage and up to $13,550 if the arrangement also covers family members. The limit is prorated by months of coverage, so a new hire with 7 months of family coverage has $7,904.17.
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Result
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What a QSEHRA is
A qualified small employer health reimbursement arrangement lets an employer without a group health plan reimburse employees for medical care expenses, after the employee provides proof of coverage, up to a yearly limit. Section 9831(d) sets the conditions: it must be provided on the same terms to all eligible employees, funded solely by the employer with no salary reduction contributions, and the total payments for any year cannot exceed the dollar limit. The dollar limit is indexed, and Revenue Procedure 2026-35 gives the 2027 amounts.
| Coverage | 2026 limit | 2027 limit | Per month, 2027 |
|---|---|---|---|
| Self-only | $6,450 | $6,700 | $558.33 |
| Family | $13,100 | $13,550 | $1,129.17 |
Prorating for part of a year
The statute says that if a person is not covered by the arrangement for the entire year, the limit is the amount that bears the same ratio to the full limit as the months covered bear to 12. A new hire who starts July 1 has 6 months, so a self-only limit of $3,350 and a family limit of $6,775. The proration rule is in section 9831(d)(2)(D)(i).
Who qualifies as the employer
The statute defines an eligible employer as one that is not an applicable large employer under section 4980H(c)(2) and does not offer a group health plan to any of its employees. This page does not test either condition. It also does not apply the written notice an employer must give employees at least 90 days before the plan year begins.
What changed from 2026
The self-only limit rose $250, from $6,450 to $6,700, and the family limit rose $450, from $13,100 to $13,550. The rule that the limit is prorated by months is statutory and unchanged.
Worked example (2027)
A small employer hires an employee on June 1 who has family coverage for the 7 months June through December. The annual family limit is $13,550, so the limit for 7 months is $13,550 times 7 divided by 12, which is $7,904.17. An employee with self-only coverage for the full 12 months has the full $6,700, or $558.33 a month. An employee who leaves after 3 months of family coverage has $3,387.50.
Common mix-ups
- Family means the plan covers family members. The higher limit applies when the arrangement also reimburses family costs.
- Proration is by months, not days. The ratio is months covered over 12.
- It is a limit on reimbursement, not an entitlement. The employer may choose lower amounts, with the same terms for all.
- Limits are for the plan year in 2027. The 2026 amounts stay in force for 2026 plan years.
- This is not the HSA limit. The two arrangements have separate caps.
Method
The tool picks the annual limit for the coverage type, multiplies by the months covered and divides by 12. It rounds to the cent. It does not test employer size, eligibility or the notice and proof-of-coverage rules. Figures were read on November 9, 2026.
What this does not cover
- Whether the employer is an eligible employer and the written notice requirement.
- The effect on an employee's premium tax credit.
- Tax treatment of the reimbursements under other Code sections and state law.
- Other health reimbursement arrangements.
Figures read from the sources below on November 9, 2026. Last updated November 9, 2026.
Sources
- IRS Revenue Procedure 2026-35, section 3.68 (qualified small employer health reimbursement arrangement) (retrieved November 9, 2026)
- IRS Revenue Procedure 2025-32, section 4.63 (the 2026 amount) (retrieved November 9, 2026)
- 26 U.S.C. section 9831 (special rules for medical savings arrangements), text at Cornell Legal Information Institute (retrieved November 9, 2026)
Frequently asked questions
What is the QSEHRA limit for 2027?
$6,700 for self-only coverage and $13,550 for family coverage under Revenue Procedure 2026-35.
How much did the QSEHRA limit increase?
The self-only limit rose $250 from $6,450 and the family limit rose $450 from $13,100.
How is the limit prorated?
By the number of months the person is covered out of 12, so seven months of family coverage is 7/12 of $13,550.
Does a QSEHRA require a group health plan?
No. It is intended for employers that do not offer a group plan.
Can employees fund a QSEHRA with salary reductions?
No. The statute requires the arrangement to be funded solely by the employer, with no salary reduction contributions.
Is the family limit per employee or per family member?
It is one limit per employee, for an arrangement that also covers the employee's family members.
Where can I read the dollar limits?
In section 3.68 of Revenue Procedure 2026-35, which the sources list links to.
Not legal or tax advice
This page is general information from an unofficial guide, not legal, payroll or tax advice. Tax law changes and your facts may differ. Confirm figures with the IRS or a tax professional before you file or set payroll. Nothing you type is sent anywhere.