Can Churches Pay Or Reimburse The Pastor And Employees For Health Insurance?

Did you know that there are 23,010 religious organizations in Florida? That includes small and large churches, and if you’re the pastor of a small church with a congregation under 200 members, you may be wondering if you can reimburse your employees for their health insurance premiums. You may be surprised to find out that you absolutely can reimburse your employees for their health insurance costs. Most churches do this via an HRA, which is a health reimbursement account. Let’s take a look at HRAs and how they can help your employees afford their own health insurance.

Church Insurance or Just an HRA?

Depending on the size of your church, you may be able to provide your pastor and employees with a flexible HRA account that can help them pay for health insurance while keeping the cost of your employer-provided benefits affordable. This is because churches that have less than 50 full-time employees are not obligated under the Patient Protection and Affordable Care Act to provide their employees with health insurance. If your growing church isn’t obligated to provide your employees with health insurance, you can still help your employees with their healthcare expenses by getting an HRA or health reimbursement account.

What Is an HRA?

Many employers, including churches, have HRAs as part of their employee benefits packages because they’re affordable. The HRA is funded by the employer so that the employee can use it for certain health-related items, including health insurance deductibles, health insurance premiums and medications, as well as other medical expenses and equipment.

Who Owns the HRA?

HRAs are set up by the employer for their employees, which means that the employer owns the HRA. Additionally, the employer is the only entity that can make contributions to the HRA. The employer can also stipulate what types of expenses can be paid for with the HRA account, and the employer determines whether or not the funds rollover from year to year.

Types of HRAs

There are several different types of HRAs, including qualified small employer health reimbursement accounts (QSEHRA), individual coverage health reimbursement accounts (ICHRA), group coverage health reimbursement accounts (GCHRA), excepted benefit health reimbursement accounts (EBHRA), dental/vision health reimbursement accounts and retiree health reimbursement accounts. All of these accounts have their own uses. Churches tend to use either QSEHRAs or ICHRAs, depending on their size.

  • QSEHRA – QSEHRA stands for qualified small employer health reimbursement account. These HRAs were created in 2016. QSEHRAs are specifically designed to help small businesses, non-profits and churches, with fewer than 50 full-time employees, provide affordable health coverage to their employees.
  • ICHRA – An ICHRA or Individual coverage HRA was created in 2020. This type of HRA works for businesses and nonprofits of all sizes. However, this type of HRA is only available to employees who have an individual health insurance policy. It does not include employees who have family insurance policies. Many large churches choose to use this type of HRA.

How Can Churches Use the HRA to Offset the Costs of Health Insurance Premiums?

Since HRAs are owned by the employer and the reimbursement amounts are set by the employer, the church can choose to reimburse their employees for the cost of their health insurance plans. For example, let’s say that after conducting a survey, the church pastor or elders discover that the average monthly insurance premium for each employee is $450. The church can then set up an HRA with a monthly contribution of $450. The employee can then use the HRA to pay for their health insurance premiums or any other allowed medical expenses.

Benefits of HRAs

  • Employers can choose how much money they put into the employee HSA accounts.
  • Employees who use the funds to pay for qualified medical expenses don’t have to worry about paying taxes on the funds they use.
  • HRAs can be used to pay for health insurance premiums as well as other listed allowable expenses.
  • Debit cards are often included with the HRA account so that participants can purchase qualified OTC medications and first aid supplies.

Should Your Church Insurance Policy be an HRA?

Many small churches with fewer than 50 employees choose to provide their employees with an HRA rather than health insurance policies, and that’s a win for both the church and the employees. The church gets to keep its expenses under control, and employees can choose the right insurance plan for their needs and budget.

Getting Church Insurance and an HRA with Help from Fearnow in Florida

At Fearnow in Florida, we offer church insurance for all churches, regardless of their size. We can even help you choose the right type of HRA so that you can help offset the health insurance costs for your pastor and employees.

We can also help you find an affordable commercial car insurance policy, as well as group health insurance, general liability coverage, cyber liability coverage, workers compensation and crime coverage.

To learn about our church insurance policies, give us a call at 813-689-8878.