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Congress Gives New Relief to Churches

By Raul Rivera

In recent weeks the U.S. House of Representatives approved legislation to repeal and replace major parts of the Affordable Care Act (ACA). The new health care legislation must now pass through the U.S. Senate before it repeals the ACA and becomes law. 

While the country anxiously awaits to see how the U.S. Senate will respond to the new health care legislation, many pastors and church leaders are still asking questions about health care as it pertains to the ACA and their churches.

For many pastors, church leaders, and church administrators, understanding the ACA and health care has been a roller coaster ride that has left them with more questions than answers.

Through another blog in the coming weeks, we will be addressing several questions that pastors and church administrators continue to have pertaining to health care. 

However, in the meantime, I have some good news for you. 

In December 2016, Congress passed legislation that provides relief to small employers, including churches, from one of the most burdensome provisions in the ACA. 

I will tell you about it next.

Congress reverses costly ACA penalty

In 2015, the IRS implemented a penalty of $100.00 a day per employee that would be assessed on employers, including churches, who reimburse employees for the cost of health insurance premiums. 

This penalty has been an unnecessary burden on many small churches and businesses who are unable to provide group health insurance to their employees.

Congress reverses costly healthcare penalty on small employers.

On December 7, 2016, Congress passed legislation that eliminated the $100.00 a day per employee penalty that was burdensome to many churches and ministries. 

Under Section 18001 of the 21st Century Cures Act, small employers with less than 50 full-time equivalent employees are now permitted to reimburse employees for the cost of personal insurance premiums or medical visits. President Obama signed this legislation into law on December 13, 2016.

Beginning January 1, 2017, the tax law now allows for a “Qualified Small Employer Health Reimbursement Arrangement” (QSEHRA). 

Employers who do not offer group health coverage and have less than 50 full-time equivalent employees are eligible to use QSEHRAs.

If your church or ministry qualifies to use QSEHRAs, there are four main rules that you need to keep in mind.

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4 things to know about the QSEHRA

1. The same terms must be offered to each employee.

In short, you cannot pay 100% of the premiums for pastors and pay a different percentage of premiums for other church employees who qualify for QSEHRAs. In other words, the terms of the benefit must be the same for everyone who qualifies. 

There are employees who can be excluded from receiving this benefit. Those individuals are as follows:

  • Employees who have been employed by the employer less than 90 days,
  • Employees who are under the age of 25,
  • Part-time employees or seasonal workers, and 
  • Employees who are covered by a collective bargaining agreement.

(Recommended reading: “The First Thing Every Church New Hire Must Do”)

2. The cost of the QSEHRA benefit must be completely employer funded.

The purpose of this benefit is to provide an employer-sponsored reimbursement. You cannot reduce the amount of an employee’s pay as a result of him/her accepting the benefit.

Additionally, each employee must provide you with proof that he/she and his/her family have minimum essential coverage, as defined by the ACA, before the payment or reimbursement of medical expenses.

3. The QSEHRA you offer cannot exceed the set maximum annual benefit caps.

The maximum reimbursement for medical expenses that you can provide through the QSEHRA is $4,950.00 for single employee coverage and $10,000.00 for family coverage.

4. You must give a proper notice of this benefit to all employees.

A notice of the available QSEHRA benefit must be given to all eligible employees at least 90 days prior to the start of the year or at the beginning of a new employee’s eligibility period. 

As the employer, you must also provide each eligible employee with a written notice detailing the amount of the QSEHRA benefit that your church will be providing. Failure to provide a written notice may result in a tax penalty of $50.00 per employee (maximum of $2,500.00 for the year).

Lastly, as the employer, you must report the total amount of permitted QSEHRA benefit for the year on Form W-2 for each employee. 

The ever-changing reality for pastors and ministry leaders

There is no doubt that the laws governing nonprofit organizations are ever-changing. While the law that governs health care could change over the next few months, it is important that you are still compliant with current law.

We will continue to monitor the process of the proposed health care law that is currently before the U.S. Senate, and we will keep you updated.

In the meantime, if you have any additional questions, give us a call at 877-494-4655, and one of our knowledgable team members will be happy to assist you. 

I also invite you to join us at one of our conferences in a city near you for a time of empowerment and impartation that will give you the needed confidence to lead your church or ministry in the 21st century.

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