by Dave Travis: In our most recent FREE report “Seven Vital Benchmarks in Church Compensation” (available at this link), the second finding deals with the percentage of church budget that goes to staffing.

In this post I want to elaborate on several Frequently Asked Questions I get in this regard.

First, the overall average was…

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Source: What Percentage of a Church Budget Goes to Staffing Costs?

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by Patrick Bradley: Turns out there are lots of church plant health insurance options. It’s still a little complicated, but you have more options than ever to choose from. Here’s an overview as a springboard to your research.

If you’re a new church hiring staff or an established church that’s never offered health insurance before, you have two basic paths to choose from: offer nothing (but pay employees well enough that they can get an individual plan), or offer an employer plan to church employees.

Individual Plan Options (Church Offers No Plan)

Small businesses with fewer that 50 employees are not required to offer health insurance. So in lieu of a group plan, the church could increase employees’ pay up front to offset the burden. You just don’t get to stipulate that it must be spent on health insurance. And it is taxable income to them.

In all of these scenarios, church employees would have to arrange for their own insurance.

Employees’ options include:

1. Get Insurance through an Obamacare Exchange

Start at healthcare.gov  It will help you find your state’s exchange or direct you to the federal exchange if your state doesn’t have one. You’ll have lots of options to choose from. Bonus: ministerial housing allowance does not count as income for Obamacare, so you’re more likely to get a government subsidy to help pay your premiums.

…

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Source: 11 Church Plant Health Insurance Options (yes, eleven!)

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by Patrick Bradley: Some churches used to reimburse health insurance premiums as a benefit to their employees. The passage of the Affordable Care Act initially made that illegal – they wanted all employers to offer group health insurance to their employees. But now the 21st Century Cures Act has made it possible for churches to reimburse health insurance premiums again.

This fix was around in 2017, but it flew under my radar. This stuff just won’t stop changing! Here’s what I’m learning:

The Old Way to Reimburse

Before the ACA, group health insurance plans were stupid-expensive if your church only had a handful of employees. And rates were based on things like the age of your oldest employee and whether any of the employees or their dependents had preexisting health conditions. That made it impractical for many smaller churches to offer group insurance.

Some churches had figured out that they could reimburse their employees for health insurance premiums. It didn’t count as income to the employee (at least not taxable income), so it was kind of like the employee had to get their own individual policy but the church “paid” for it.

Starting in 2015, the penalty for continuing an arrangement like this was $100/day/employee. Many churches stopped offering any kind of plan or reimbursement and the employees were forced to go to their ACA insurance exchange.

The New Way (QSEHRA)

Now churches, within certain limits, can return to a kind of reimbursement arrangement.

Church Eligibility

For this to work, your church has to:

Have fewer than 50 employees
NOT offer a health insurance option

Employee Eligibility

If you reimburse health insurance premiums through QSEHRA, you must cover employees except:

employees younger than 25
part-time or seasonal workers (though can opt to cover them)
employees in their first 90 days on the job
…and a few other categories that would be unusual at a church

So basically you have to offer the same benefit to all full-time employees. You can’t discriminate between clergy and non-clergy. But “same benefit” can be a percentage such that each employee doesn’t necessarily get the same dollar amount[2].

Rules

Some other rules for a QSEHRA:

2018 Reimbursements can’t exceed $10,250/yr for family coverage ($854.17/mo) or $5,050/yr for employee-only ($420.83/mo)
Employees have to maintain and prove that they have Minimum Essential Coverage – and those popular health care cost sharing ministries don’t count
Employees have to turn in receipts (which means churches have to review & pay them)
Your church will have to adopt a formal QSEHRA plan document
…and probably a few other rules, too

Drawbacks

Converting to a QSEHRA

If your church has been around long enough to have done things the Old Way, you may fixed it by just increasing everyone’s salary by the amount you’d been reimbursing them. But under this new arrangement, your church can’t go back. MinistryWorks tells us, “Your ministry cannot ‘carve out’ a portion of workers’ wages to fund the benefit. The benefit must be paid in addition to regular wages.”[2] So now you’d have to increase everyone’s salary again.

Compliance

A huge drawback is that creating a QSEHRA program also creates a HUGE bureaucratic burden. You’ll have to:

Give every employee proper written notice (and document it)
Get receipts for expenses and proof of coverage from employees
Report the reimbursement amount on their W2s
Comply with HIPAA privacy and data security requirements
Figure out if it creates any ERISA obligations

Reduced Subsidies

Another drawback I see is if the employee has been getting a tax subsidy that pays for part of his/her health insurance premium through the ACA exchange: their subsidy will be reduced by the amount of the QSEHRA they receive, even down to $0[3]. So basically the cost is transferred from the government (taxpayers, really) to the church. Why would your church sign up to pay what’s already being paid by the government? Just calling it like I see it.

Add to that, nobody is writing about whether employees have to count the QSEHRA reimbursements as qualifying income they’d have to report to their ACA exchange. I’m not sure anyone really knows the answer to that yet. But worst case would be ‘yes’, which would double-ding the employee.

Bottom Line

I’d have to see the math work out for me to be excited about this. For now and as far as I can math it, doesn’t sound like a win-win yet.

Special thanks to Doug Foltz at Stadia Church Planting for putting this on my radar.

[1] clergytaxnet.com/health-reimbursement-arrangement-churches/

[2] ministryworks.com/resources/a-health-care-reimbursement-option-now-available/

[3] zanebenefits.com/blog/will-the-qsehra-work-for-my-church

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Source: Churches Can Reimburse Health Insurance Premiums Again – But is It Worth It?

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At Passion for Planting, we believe it’s wise for church planters to have health care coverage for their whole family. It is also now a non-negotiable for the US government: under the Affordable Care Act, everyone must have health insurance or pay fines.

Health insurance is expensive, so how can your new church afford to provide it for the planter and staff? Your church has a couple of options, as articulated here by our own Patrick Bradley.

OPTION A – Cover all full-time employees

The Affordable Care Act allows small employers to opt out of offering health insurance, but it also created a build-you-own-group-plan option for those small employers: the SHOP program. Now your church can offer a group plan with a cafeteria of choices just like major employers do. There are a couple of conditions to make it work, but they’re pretty easy. And there are almost certainly tax subsidies that make the coverage very affordable. To learn more about these options visit: Health Care Options

Within the SHOP program, you can still decide as the employer whether to cover all or a portion of your employee’s costs (for example, you could give employees a $500 credit to the program, then they can pick any plan they want and pay the difference).

Setting up a SHOP group plan is recommended for new churches. If you are utilizing Passion for Planting’s project management services, your project manager may be able to help you with some of the details.

OPTION B – Offer no health insurance whatsoever

As a church, you could decide that it’s either too expensive or too complicated to set up a SHOP program for your employees. If you go this route, all of your staff will be on their own to shop for health insurance. They would probably do this through Affordable Care Act, so the coverage ends up being about the same from the employee’s perspective; it’s just a question of who’s paying for it.

ILLEGAL OPTION C – Offer no insurance but increase salaries

Firstly, employers don’t have the right to tell their employees how to spend their paychecks, so you can’t say, “We’ll increase your salary by $x to cover your health insurance.”

Secondly, the government wants your church to provide health coverage through the health care exchange. Simply increasing an employee’s pay by the amount of the premium (while offering no health plan) will almost certainly be construed by the IRS as an attempt to circumvent the law.

This route also creates all kinds of complicated repercussions, too:

• Not even an email could be exchanged discussing your intentions to play this game; that would be clear evidence of your intent to evade the law

• What if your church eventually does want to offer a group plan? You can’t just go and cut everyone’s salary by the amount you were trying to hide in their salary; again, clear evidence

• What if the law changes and now your church is forced to offer a group plan? same problem

We are in the early days of the Affordable Care Act, so there’s no case law yet where the IRS has come after a church for doing that. But playing this shell game is plainly against the intent of the law, and while this practice is not technically illegal at this point, the law is set up in such a way as to push you towards the Affordable Care Act.

CONCLUSION

Long term, if you really want to offer your employees health coverage, your best and only practical option is to go through the SHOP health care exchange.

So let your yes be yes (offer a SHOP plan), or your no be no (sorry, we don’t offer health benefits at all).

This content was written while the author was employed by Stadia Church Planting; we are grateful for willingness to help you through this post. To download a PDF version, click here.

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