Small businesses—including churches and related ministries—can once again pay premiums for their employees’ health insurance. These arrangements were previously known as an Employer Payment Plan (EPP) or Health Reimbursement Account (HRA). Such arrangements violated the Affordable Care Act (ACA). However, due to a recently passed law, ministries that are not part of a group health plan now have another option to help employees with health care costs.
The 21st Century Cures Act went into effect at the end of 2016. It includes a provision known as the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). QSEHRA allows eligible employers to pay or reimburse eligible employees for medical care expenses (see who qualifies, below). The tax-free benefit includes insurance premiums and eligible out-of-pocket medical expenses.
Previously, ministries used EPPs to help pay employee health insurance premiums. With the passage of QSEHRA, ministries may once again find reimbursement plans preferable to offering a group insurance plan. However, the new law does have a few new restrictions. To be eligible to offer a QSEHRA plan to employees, your ministry:
The new law also contains restrictions for which employees are eligible to participate. Eligible employees must meet both of the following criteria:
Your ministry can implement a QSEHRA plan for your employees using the following guidelines:
The ministry must furnish an informational statement explaining the QSEHRA policies to employees 90 days before the end of a calendar year (see Can my ministry begin using this method for 2017?, below). The statement must include an explanation that the employee is subject to penalties under the ACA if coverage is dropped.
A QSEHRA plan also should comply with other federal and state requirements and best practices you already have in place. For example, you may need to have a separate summary plan document for the QSEHRA plan and make sure that you are meeting all HIPPA privacy and security rules. Additionally, you may want to check with your tax advisor before setting up the plan to make sure that your employees will not be negatively impacted by other tax consequences.
Employees need to carry insurance that meets the requirements for minimally essential insurance coverage. Ministry employees should know employer payments may affect their ability to obtain tax subsidies offered through the insurance exchange.
There’s still time to change health insurance options for your employees. Normally, changes would take effect at the beginning of the year. But because the law is new, ministries have until March 13, 2017, to issue a change notice to employees. If you plan to wait until 2018 to incorporate changes, ministries should issue the notice 90 days before the end of 2017.
Many ministries may welcome this news. However, before making any changes, consult with a locally licensed attorney, benefit consultant, or tax professional.
The information in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.