HRA vs Stipend Calculator

You have a fixed sum for health benefits. You can reimburse what your staff spend on coverage, or you can raise their pay by the same money. Both cost you the same. They are not worth the same to your staff, and which one wins depends on how many of them already have coverage. Free, no account required.

Your numbers

Health-benefits budget for the year

Everything the school will spend on health benefits, including what the platform charges.

Employees offered the benefit

Payroll staff only. A contractor cannot be covered either way.

How many already have health coverage

Their own plan, a spouse's, a parent's, Medicare or Medicaid. This is the field the answer turns on: only these people can be reimbursed tax-free.

Average salary of those staff

Social Security, unemployment and workers' compensation each stop at a wage base, so a stipend costs the school less on top of a full salary than on top of a small one. Leave 0 if you would rather not say.

Platform base fee, per month

What the reimbursement platform charges before per-employee pricing. Enter 0 if there is none.

Platform fee per employee, per month

Charged on everyone enrolled, whether or not their reimbursement is tax-free.

State

Sets unemployment and workers' compensation, which a taxable dollar carries and a reimbursed one does not.

How the school is set up

A 501(c)(3) owes no federal unemployment tax (IRC 3306(c)(8)).

Staff income-tax rate, % (optional)

Left blank, the figures are net of Social Security and Medicare only, so the gap below is a floor rather than an estimate.

What your staff actually keep

The reimbursement plan puts $791 more in your staff's pockets, for the same spend.

4 of 7 already have coverage, so 3 of the reimbursements would be taxed as wages. Enter an income-tax rate to see the full gap.

Reimbursement plan (QSEHRA / ICHRA)

Reimburse what they spend on coverage. Tax-free for anyone already covered.

Per employee: $5,168
Paid to staff: $36,178
Employer payroll tax: $1,242
Platform fee: $2,580
You spend: $40,000
Staff keep: $34,992

Taxable stipend

Raise pay by the same money. Wages, so both sides pay tax on all of it.

Per employee: $5,291
Paid to staff: $37,034
Employer payroll tax: $2,966
Platform fee: $0
You spend: $40,000
Staff keep: $34,201

What these numbers do not settle

QSEHRA annual maximum not supplied
Enter the QSEHRA maximum per employee for your plan year, from the IRS revenue procedure that sets it. We hold no figure: it is indexed every year, and a stale cap printed beside a compliance verdict is worse than none. An ICHRA has no cap, so leave this blank if that is what you are running.
Income tax is not priced
Enter the staff's combined marginal income-tax rate to see the full take-home difference. Without it these figures are net of Social Security and Medicare only, so the reimbursement plan's advantage is a floor rather than an estimate.

How it's calculated

Your budget pays three things: the money that reaches your staff, the employer payroll tax on whatever part of it counts as wages, and the platform fee. The calculator solves for the largest equal per-person amount those three can cover, which is why the reimbursement and the stipend come out at slightly different per-person figures even though both spend the same budget.

A reimbursement is tax-free only for someone who already holds coverage (IRC 105(b), 106 and 9831(d)(2)(B)). For anyone else it is ordinary wages, taxed exactly like the stipend. So a school where nobody is covered pays the same tax either way and the platform fee is pure loss, while a school where everyone is covered avoids the tax on every dollar.

The employer tax is not a flat percentage. Social Security stops at an annual wage base, federal unemployment at $7,000 and state unemployment at a state figure, so the calculator prices each award against those bases rather than multiplying by one blended rate.

How to use this calculator

1
Enter the budget, not the per-person amount
Everything the school will spend on health benefits this year, including whatever the reimbursement platform charges. The calculator works out what is left to hand out.
2
Count who already has coverage
This is the field the answer turns on. A reimbursement is tax-free only for someone who already holds health coverage, so the split between covered and uncovered staff decides which option wins.
3
Pick your state and entity
Unemployment and workers' compensation are set by state, and a 501(c)(3) owes no federal unemployment tax at all. Both change what a taxable dollar costs the school.
4
Read what the staff keep, not what you hand out
Both options spend your whole budget. The difference is how much of it survives the tax on the way to the people you are trying to pay.

Questions

Is an HRA always better than a stipend?

No, and that is the point of running the numbers. A reimbursement is excluded from income only for an employee who holds minimum essential coverage. For staff who have no coverage, the reimbursement is ordinary wages, taxed exactly like a stipend, and the reimbursement plan is then the same money plus a platform fee. A school where nobody is covered is better off paying the stipend.

What is a QSEHRA?

A Qualified Small Employer Health Reimbursement Arrangement. An employer with fewer than 50 full-time equivalents that offers no group health plan can reimburse staff for coverage they buy themselves, tax-free, up to an annual limit set each year by the IRS. It has to be offered on the same terms to every eligible employee.

What is the difference between a QSEHRA and an ICHRA?

A QSEHRA is capped in dollars and limited to employers under 50 full-time equivalents. An ICHRA has no dollar cap and no size limit, and can sit alongside a group plan for a different class of employee, but it requires the employee to be enrolled in individual coverage or Medicare. Someone on a spouse's group plan holds minimum essential coverage and is still not eligible for an ICHRA.

Why does the stipend cost the school more in payroll tax?

Because a stipend is wages. The school owes Social Security, Medicare, federal and state unemployment and workers' compensation premium on it, and the employee owes their own Social Security, Medicare and income tax. A qualified reimbursement is excluded from wages, so neither side pays any of that.

Does this include income tax?

Only if you enter a rate. Income tax depends on the household, so the calculator will not invent one. Leave it blank and the figures are net of Social Security and Medicare alone, which makes the reimbursement plan's advantage a floor rather than an estimate: adding income tax can only widen it.

Can I reimburse a contractor?

Not tax-free. The income exclusion is an employee benefit, so a payment to a 1099 contractor is simply more contract price. Count payroll staff only.

Benefits are one line in a budget

This tool prices one decision. SchoolStack Budget builds the whole five-year model around it: payroll with real wage bases, enrollment, facility, debt, and the Lender Conversation Snapshot at the end.

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