A common question we get from small business owners is whether they can offer employees a stipend in place of health insurance.

The short answer is yes, but business owners should be aware of the tax implications of a health stipend versus a taxfree reimbursement plan like a health reimbursement arrangement, or HRA.

In this video, I’ll discuss taxable health stipends and taxfree alternatives for your organization.

Read our article for more information: https://www.peoplekeep.com/blog/stipe...

Learn more about HRAs: https://www.peoplekeep.com/healthrei...

Learn more about employee stipends: https://www.peoplekeep.com/employees...

CHAPTERS:
0:00 Introduction
0:45 What is a health stipend?
1:42 Who is a stipend good for?
2:24 Limitations to health stipends
2:47 What is a health reimbursement arrangement?
3:45 Conclusion

One way you can help your employees cover the cost of health insurance and medical expenses is to offer a health insurance stipend. This is simply extra money in an employee’s paycheck for the purpose of covering these expenses.

In general, while an employer may ask employees to spend their extra funds on healthcare, they can’t require them to do so.

However, with an employee benefits administration platform like WorkPerks from PeopleKeep, employers can set up and manage stipend reimbursements for medical expenses. This ensures that your employees use their payments for the expenses you intend. However, you still can’t require employees to prove that they purchased a health insurance policy.

The money used to reimburse employees is considered taxable income for employees. Additionally, you may be required to pay any payroll taxes.

In most cases, an HRA is a better option than a health stipend. But what is an HRA?

An HRA allows you to reimburse your employees taxfree for their qualifying medical expenses. There are several different types of HRAs available. Three of the most popular options are the qualified small employer HRA, or QSEHRA, the individual coverage HRA, or ICHRA, and the group coverage HRA, or GCHRA. This is also often called an integrated HRA.

PeopleKeep is the leader in personalized employee benefits administration software. We make it easy to create and manage your employee benefits and perks, such as HRAs and stipends, in minutes.

Since starting in 2006 as Zane Benefits, we've helped thousands of organizations offer affordable benefits to their employees.

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