QSEHRA Limits 2027: $6,700 Self-Only, Family Depends on October

Small employers who want to help their staff pay for health insurance without running a group plan have one tax-favored tool built for exactly that, the qualified small employer health reimbursement arrangement, or QSEHRA. Its annual dollar cap moves with inflation, and the 2027 number is now almost fully knowable, with one stubborn exception. The short answer: the projected 2027 QSEHRA limit for self-only coverage is $6,700, and it comes out the same under either method of dealing with a missing month of inflation data; the family limit is either $13,550 or $13,500, depending on how that missing month is handled. The IRS will settle it when it publishes its 2027 adjustments, normally late in October or in November.

What a QSEHRA is and who can offer one

A QSEHRA is an arrangement in which an employer reimburses employees, tax-free, for medical expenses, including the premiums they pay for individual-market health insurance. It was created by the 21st Century Cures Act and sits in 26 U.S.C. § 9831(d). The statute starts from two base amounts, $4,950 for self-only coverage and $10,000 for family coverage, and then indexes them for inflation. Those base amounts are the reason the real numbers look so odd: the 2026 caps of $6,450 and $13,100 are simply the original figures carried forward by cost-of-living adjustments.

The eligibility rules are narrower than many owners expect, and they are worth reading before the dollar figures matter. The employer must not be an applicable large employer, which in this context means a business with fewer than 50 full-time-equivalent employees. It must also not offer a group health plan to any of its employees; a company that already runs one cannot add a QSEHRA on the side. The arrangement has to be funded solely by the employer, which rules out any salary-reduction contribution by the employee, and it has to be offered on the same terms to all eligible employees. The employer must give employees written notice at least 90 days before the start of the plan year, a requirement found in § 9831(d)(4). The employee, for their part, must have minimum essential coverage, the ACA term for ordinary qualifying health insurance, for the reimbursements to be free of tax.

The 2026 figures and where the 2027 projection comes from

The indexing rule in § 9831(d)(2)(D)(ii) tells the IRS to apply the same inflation formula used elsewhere in the code, § 1(f)(3), but with calendar year 2015 substituted as the base year. That formula relies on the chained consumer price index for all urban consumers, known as the C-CPI-U, averaged over the twelve months ending August 31. The result is then rounded, and the rounding rule matters a great deal here: if the indexed amount is not a multiple of $50, it is rounded down to the next lower multiple of $50. The amount is rounded, not the increase, so a family figure of $13,553.93 becomes $13,550 and one of $13,537.10 becomes $13,500.

Two recent official figures show the trend. For 2025, Rev. Proc. 2024-40 set the caps at $6,350 and $12,800. For 2026, Rev. Proc. 2025-32 (section 4.63) set them at $6,450 and $13,100. The 2026 monthly equivalents, simply the annual cap divided by twelve, are $537.50 for self-only and $1,091.67 for family coverage. Before projecting anything for 2027, I ran the same method against the 2026 inputs, and it reproduces both official 2026 figures exactly, the self-only $6,450 and the family $13,100. That is two control figures out of two, which is not a large sample, but a projection that missed either would not deserve your trust.

The October 2025 problem

The Bureau of Labor Statistics did not collect October 2025 price data, a consequence of the federal government shutdown, so the C-CPI-U series has a hole in exactly the twelve-month window the IRS uses. The August 2026 reading was published on September 11, 2026, which means the window is closed and every number that exists is already in hand. What remains is a judgment call about the one number that does not exist.

There are two reasonable ways to handle it. The first is to average the eleven months that were actually measured, an approach I call the eleven-month average. The second is to impute a value for October, filling the gap with an estimate, and then to average all twelve. Nothing in § 1(f) tells the IRS which to choose, because the statute never imagined a missing month. That is why the family figure splits into $13,550 and $13,500 while the self-only figure does not.

Why the self-only number holds and the family number splits

The easiest way to understand the split is to look at where each unrounded value falls relative to a $50 step. For self-only coverage, the eleven-month method gives $6,709.20 and the imputed method gives $6,700.86. Both sit between $6,700 and $6,750, so both round down to $6,700. For family coverage, the eleven-month method gives $13,553.93, which sits between $13,550 and $13,600 and rounds down to $13,550, while the imputed method gives $13,537.10, which sits between $13,500 and $13,550 and rounds down to $13,500. The two methods produce values only a few dollars apart, but the $13,550 step happens to fall between them.

The self-only result deserves a caution of its own. Under the imputed method, the unrounded figure clears the $6,700 step by only $0.86. That is the thinnest margin in this projection, and it is the reason I would describe $6,700 as very likely rather than certain. A slightly different imputation could in principle move it down a step. The eleven-month method has far more room, at $6,709.20. If you are drafting a plan document or a reimbursement budget today, $6,700 for self-only is the number to plan around, and $13,500 is the safe family figure, with $13,550 as the upside if the IRS averages eleven months.

What the limit actually caps

The dollar limit is an annual ceiling on the reimbursements an employer may provide to one employee, and it is prorated by month when the employee is not covered under the arrangement for the whole year, as § 9831(d)(2)(D)(i) provides. A worker hired partway through the year, or one who becomes eligible later, therefore gets only the months in which they were covered, not the full annual amount. The monthly maximums in the table, $558.33 for self-only and either $1,129.17 or $1,125.00 for family, are just the annual caps divided by twelve, and they are the building blocks for that proration.

Employers report the arrangement on the employee’s Form W-2 in box 12 with code FF. If you have never decoded that box, finbarrow’s guide to the W-2 box 12 codes lists each code and what it means.

How a QSEHRA interacts with the premium tax credit

For employees who buy coverage on the ACA marketplace, the QSEHRA is not merely a nice perk; it can change or eliminate the premium tax credit. Under § 36B(c)(4), if the QSEHRA is affordable, the employee is not eligible for the credit at all. If it is not affordable, the credit is not lost but is reduced by the amount of the QSEHRA. Everything therefore turns on the affordability test, which IRS Notice 2017-67 spells out.

The test starts with the premium for the second-lowest-cost silver plan available to the employee for self-only coverage. From that monthly premium you subtract one-twelfth of the self-only QSEHRA amount. The result is then compared with one-twelfth of the required contribution percentage multiplied by the employee’s household income. The required contribution percentage for 2027 under § 36B(c)(2)(C) is 10.22 percent, according to Rev. Proc. 2026-26. If the leftover premium is at or below that income-based threshold, the QSEHRA is affordable and the credit is gone; if it is above, the arrangement is unaffordable and the credit is merely reduced.

Notice that the test uses the self-only QSEHRA amount, which is one more reason the self-only projection is the figure that matters most for the credit calculation. For the credit itself, including the income thresholds that decide who qualifies in the first place, see finbarrow’s 2027 premium tax credit table and the 400 percent FPL cliff. I have deliberately not invented a worked premium example here, because the result depends on a real plan premium in a real county, and any number I chose would look more authoritative than it is.

QSEHRA versus an individual coverage HRA

Employers who outgrow the QSEHRA conditions, or who simply want more flexibility, often look at the individual coverage HRA, usually shortened to ICHRA. The legal distinction that matters most for budgeting is that the ICHRA has no dollar cap set by statute, so an employer can decide for itself how much to contribute, within the rules of the arrangement. The QSEHRA, by contrast, is capped, and the cap is the number this page tracks. The trade-off is that the QSEHRA comes with its own eligibility conditions, notice requirement and reporting, all described above.

Business owners who are also self-employed have a separate question about their own health coverage; finbarrow’s guide on the HSA for the self-employed covers that adjacent territory, and the 2027 HSA contribution limits are a useful companion, since many people pair reimbursement arrangements with other health savings tools.

What could still change

The honest caveat is the one the whole 2027 series carries. The IRS will publish the official figures in its annual inflation-adjustment revenue procedure, historically in late October or in November, and until that document appears every number above is a projection. The decisive variable is how the IRS treats October 2025. If it averages the eleven months that exist, the projection is $6,700 and $13,550; if it imputes October first, the projection is $6,700 and $13,500. The self-only figure is the same either way, which is why I would treat it as the planning number, but the $0.86 margin under the imputed method means even that figure is not beyond question.

The other piece worth watching is the required contribution percentage. The 10.22 percent figure comes from Rev. Proc. 2026-26 and governs the affordability test for 2027, so it is firmer than the QSEHRA cap, though a plan’s affordability still depends on local premiums that no projection can supply. When the official revenue procedure lands, finbarrow’s 2027 IRS inflation adjustments tracker will be updated alongside it. Until then, employers writing plan documents for 2027 should set the self-only cap at $6,700 and build in a note that the family figure is pending, rather than hard-coding a number the IRS may move by $50.

Sources

• 26 U.S.C. § 9831 (QSEHRA, subsection (d)) — law.cornell.edu/uscode/text/26/9831
• 26 U.S.C. § 36B (premium tax credit, including (c)(2)(C) and (c)(4)) — law.cornell.edu/uscode/text/26/36B
• IRS, Rev. Proc. 2025-32 (2026 inflation adjustments, section 4.63) — irs.gov/pub/irs-drop/rp-25-32.pdf
• IRS, Rev. Proc. 2024-40 (2025 inflation adjustments, section 2.63) — irs.gov/pub/irs-drop/rp-24-40.pdf
• IRS, Notice 2017-67 (QSEHRA affordability and premium tax credit) — irs.gov/pub/irs-drop/n-17-67.pdf
• IRS, Rev. Proc. 2026-26 (2027 required contribution percentage of 10.22 percent) — irs.gov/pub/irs-drop/rp-26-26.pdf
• Bureau of Labor Statistics, C-CPI-U series — api.bls.gov/publicAPI/v2/timeseries/data/SUUR0000SA0