New Health Insurance Rules for Pastors

Great news. Health Reimbursement Arrangements signed into law!

In December, the 21st Century Cures Act was passed that will once again allow churches with less than 50 (full-time equivalent) employees and no group health plan to pay for their pastor’s health insurance.

A QSEHRA is an employer-funded health benefit plan that, after the employee furnishes proof of coverage, reimburses employees for out-of-pocket medical expenses and individual health insurance premiums. (Employees may not make contributions to a QSEHRA.)No funds are expensed until reimbursements are paid. Employers reimburse employees directly only after the employees incur approved medical expenses.

Annual employer contributions for QSEHRAs are capped at $4,950 for a single employee and $10,000 for an employee with a family.  

A QSEHRA may reimburse any expense considered to be a qualified medical expense under IRS Section 213 of the Internal Revenue Code, including premiums for personal health insurance policies. Within IRS guidelines, employers may restrict the list of reimbursable expenses in any way they choose for their QSEHRA plan.

If you have more than 1 full-time employee, you must offer such arrangement to all “eligible employees.” You can exclude from “eligible”: Employees who have not completed 90 days of service; employees under age 25; part-time/seasonal employees; union employees; and non-resident aliens with no U.S. source of income.

Know that there are compliance obligations that go along with sponsoring a QSEHRA: Notice requirements; Obtaining substantiation from eligible employees; W-2 reporting; HIPAA privacy and security; and ERISA obligations.

If the employee has purchased health insurance through an ACA Exchange, any exchange subsidy, known as the Premium Tax Credit, will be reduced (but not below zero) to the extent of the permitted benefit under the QSEHRA. This prohibition, preventing dual subsidies from the employer and the ACA, is determined on a monthly basis.

Since a QSEHRA is subject to ERISA, a legal QSEHRA plan document must be provided in writing. A Summary of Benefits is not considered A QSEHRA Plan Document but you will need this as well.

Converge MidAmerica is not any kind of expert on this. But we wanted to make you aware of this change. We encourage you to do your due diligence before proceeding. If you want to discuss any of this, feel free to call Ray Woods at our office: 847-692-4125.