Looking for an alternative to pricey group insurance for your church employees? A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) may be just what you are looking for. QSEHRAs are increasing in popularity among churches as group plans become more expensive. This arrangement allows churches to offer flexible and cost-effective health insurance for church employees and provides a way for the church to take care of its dedicated team.
QSEHRA for churches: how it works
The most important thing about QSEHRA is that it allows churches to reimburse employees tax-free for individual health insurance premiums and medical expenses. This is a big deal because churches can now get the same favorable tax treatment as big company group health plans but with a lot less hassle.
It also enables churches to adopt a strategy called "defined contribution" which is much simpler than hassling with a one-size-fits all group plan and is proven to be much more efficient, affordable, and predictable.
Churches can now give their employees a fixed dollar amount each month, say $200, and each employee can then shop for the plan that fits his or her needs the best. Sally can choose a Blue Cross plan for her doctor, Roger can get Aetna to cover his prescription, and Betty can stay on her husband's group plan. Gone are the days of comparing quotes from each insurance company or the headache of trying to get everyone what they want without breaking the budget! And employees end up happier too.
Defined contribution health benefits allow churches complete control over the costs of the health benefits, creating predictability with the health benefits budget. For example, with defined contribution health benefits:
- There are no minimum amounts to contribute (the church decides the amounts of the defined contribution allowances).
- Costs are not incurred until employees receive reimbursement
- Pre-funding accounts are not required
- Unused funds stay with the church
QSEHRA for churches: who qualifies
In order to participate in the Qualified Small Employer HRA, the following criteria need to be met.
- The church must have fewer than 50 full time employees
- Cannot be combined with a group health plan
- Employees use the HRA to reimburse health insurance premiums and other out-of-pocket medical expenses tax-free.
- There are no minimum contributions to participate. Annual contributions (for 2022) are capped at $5,450 for a single employee and $11,050 for an employee with a family. HRAs are completely company funded and employee contributions are not allowed.
- Employees participating in a Qualified Small Employer HRA are required to have minimum essential coverage to receive HRA reimbursements.
- Employees participating in Qualified Small Employer HRA may access premium tax credits. However, if an employee is eligible for a premium tax credit, the amount of the credit will be reduced by the monthly HRA amount.
- Generally, the church must make the same HRA contributions for all eligible employees. However, amounts may be varied based on family status or employment status such as clergy/pastor, full-time staff, or all staff.
Getting started with QSEHRA for churches
Does all of this sound complicated? Expensive? Here's some good news. With help from Take Command, this can be easy! Our QSEHRA platform will handle all the accounting and legal legwork for the QSEHRA, take care of onboarding each of your employees, and make tax time easy and painless. You'll never have to hassle with receipts or worry about setting up a health plan again.
A wife to one and mother to four, Keely does all of the things. She’s also dabbled in personal finance blogging and social media management, contributed to MetroFamily magazine, and is passionate about good food, treasure hunting and upcycling. With a B.S. in Psychology from the University of Oklahoma and a knack for a witty punchline, it’s no surprise that Keely’s social posts are as clever as they get. In her (very little) free time, you’ll find Keely with her nose in a book or trying out a local restaurant with her family.