Congress Provides New Opportunity for Tax-Free Health Care Coverage

Great news for all churches with between 2 and 50 full-time employees!

About a year ago, the I.R.S. provided help for churches with just one full-time employee, but exempting them from the laws related to the Affordable Care Act. That allowed single-employee churches to go back to paying a pastor’s health-insurance premiums in tax-free dollars to the pastor. At the same time the I.R.S. gave that good news to single-employee churches, it gave terrible news to churches with two-or-more employees, levying $100/day/employee fines to any churches paying for their employee’s health care in any way other than a GROUP plan.

On December 13 the “21st Century Cures Act” was signed into law. This new legislation allow churches with between 2 and 50 full-time employees to again offer TAX-FREE health benefits to pastors, even though the church can’t provide a group-health-insurance plan. This is done through an HRA (Health Reimbursement Account), paid into by the employer. The employee can then spend that money on non-group health insurance premiums, including “Obamacare” plans.

There are a number of specific requirements to take advantage of this new plan. Email Larry.Roberts@fmcusa.org for more complete information. The most significant are these:
• The maximum permitted contribution by the employer is $4,950 per year for an employee with “single” coverage, or $10,000 per year for employees with “family” coverage.
• All full-time employees must be covered.
• Coverage must be the same for all employees, although differences are allowed based upon different costs of premiums based upon single vs family plans, variations in premiums tied to age, etc.
• 100% of the HRA must be funded by the church, the employee cannot contribute additional dollars into the plan.
• Employees must be given notice of the availability of the HRA’s at least 90-days in advance of each plan year. However – since this legislation wasn’t passed until December 13, 2016, this year the notice can be given up until March 16.
• The employee must have “minimum essential coverage” (as defined by the Affordable Care Act) for the contributions into the HRA to be tax-free.

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