Churches were relieved when the Qualified Small Employer Health Reimbursement Arrangement (QSE-HRA) came into law in late 2016. Finally, there was an affordable health coverage option for small churches. The plan was quickly adopted by thousands of small churches and remains extremely popular today.

In June 2019, The President announced continuing HRA expansion with the Individual Coverage HRA (ICHRA) for plan years beginning January 1, 2020, and later. Like the QSE-HRA, the ICHRA reimburses employees for their purchase of health insurance and related expenses, but without the employee group size limit of fewer than 50 and the ICHRA brings more choice and savings.

But the ICHRA is not exactly the same as the QSE-HRA, and we think it’s important that churches considered a change to the new model know the differences between the two plans.

Our comparison chart provides a quick glance at the most prominent rules governing each HRA. 


Plan Features QSE-HRA ICHRA
No. employees, minimum 1 1
No. employees, maximum 49 Any
Annual funding limit $5,450 self-only or $11,050 family, adjusted annually None
Employers can limit the types of reimbursements Yes Yes
Integrates with Medicare Yes Yes
Integrates with a group health plan (spouse, parent) Yes No
May offer a group health plan to other staff No Yes
Premium Tax Credit Yes

(offset by QSE-HRA)


(annual opt-out option)

Proof of MEC Yes Implicit
Substantiation of coverage – Annual Yes Yes
Substantiation of coverage – Ongoing Yes Yes
Reimbursement of health-sharing plans No No
Tax-free reimbursements of qualified expenses to employees Yes Yes
Pay balance of premium via Section 125 plan Yes Yes
Coordinates with HSA Yes2 Yes2
Coordinates with FSA No Yes
Allows reimbursements without health coverage No No

The mechanics of a QSEHRA and ICHRA are surprisingly simple. At a high-level, employees pay for their own health expenses and you reimburse them. Here’s how it works:

  1.  The church would design its plan and set reimbursement allowances
  2. Employees pay for their own health insurance and medical bills
  3. Employees provide proof of their expenses
  4. The church reimburses the employee up to the set limit

Some churches help their employees with health insurance by offering a “health allowance or stipend.” While the employees benefit from an allowance or stipend, this amount is taxable income and is reported in box 1 of Form W-2.   

Still, have questions?
Contact Pro Advisor Support to answer your questions.

Clergy Financial Resources
Tax I Payroll I Bookkeeping I HR
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421.0101
Fax: (888) 876.5101

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com


If you would like to learn more about our tax services designed for clergy or payroll, bookkeeping or HR designed for churches, please complete the request form to have an advisor contact you.

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