The Health Reimbursement Arrangement (HRA) model has made it possible for more churches to provide health care benefits for their employees with complete control of the costs and provide a pre-tax benefit to their employers. There are multiple HRA types to choose from, such as the One-Person Health Reimbursement Arrangements (HRA), Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), and as of January 2020, churches can offer the newest HRA option—the Individual Coverage Health Reimbursement Arrangement (ICHRA).

While having more HRA options is great for churches, you may be wondering whether the HSA, QSEHRA, or the ICHRA is best for your church, so we’ve prepared a short summary to help you understand how they work.

One-Person HRA Plan

Coverage for just one employee – Most of the time, this is designed for smaller churches with one qualified clergy person and a few part-time employees. This type of plan is also known as the Section 105 HRA, in reference to the governing Section of the IRS Code.

Like any other HRA, the church determines the amount available to the employee for reimbursement of health insurance premiums and related medical expenses during the plan year.

Out-of-pocket expenses eligible for reimbursement with a one-employee HRA include all of those named in IRS Publication 502.

What is the QSEHRA?

As of January 2017, churches with 50 full-time employees or less can opt for the Qualified Small Employer HRA to cover employee medical costs and individual insurance premiums. Churches set a monthly allowance for employees’ medical expenses, and when an employee incurs an out-of-pocket medical cost, they submit it for verification before receiving reimbursement from that allowance.

The IRS sets monthly and yearly maximum allowances for the QSEHRA, so an individual can receive up to $5,300 a year, and families can receive up to $10,700 a year, usually divided into monthly increments. The allowance rolls over month to month and year to year, but it cannot exceed these allowance caps.

What is the ICHRA?

Starting in January 2020, churches can use the Individual Coverage HRA, which provides more flexibility for churches of all sizes. For example, a church that provides group insurance for full-time employees may offer ICHRA benefits for part-time or seasonal employees.

With this HRA type, the church funds a monthly allowance to reimburse ICHRA-eligible employees for qualified medical expenses and health insurance premiums. To qualify for reimbursements from an ICHRA, employees must be enrolled in an individual health insurance plan and cannot receive premium tax credits.

There are no limits on the allowance set for ICHRA funds, but churches should offer the same amount to employees in the same class (e.g. all seasonal employees should receive the same monthly allowance). This allowance rolls over month to month and year to year (unless the employee leaves the church—in this case, the HRA doesn’t go with them).

What do the QSEHRA and ICHRA have in common?

Because the QSEHRA and the ICHRA are both types of HRAs, they function the same way:

  • Churches set the monthly reimbursement allowance for employees using tax-free funds.

  • When an employee spends money on a qualified medical expense or pays for their individual health insurance premiums, they can submit their proof of payment to the church for reimbursement.

The church verifies the expense and draws on the HRA funds designated for that employee to reimburse the cost.

Premium tax credits


Employees who receive premium tax credits to pay for health insurance premiums can still participate in the QSEHRA, but the reimbursement amounts they receive will directly reduce their tax credit amounts.


Employees who receive premium tax credits to pay for health insurance premiums cannot also receive reimbursements through the ICHRA program.

Which option is right for your church?

The right option for your church will depend on many factors. Consider your church and the benefits you currently offer employees when considering the HRA, QSEHRA, and the ICHRA. Do you employ less than 50 full-time workers? Is it unfeasible to offer a group insurance policy for employees? 

Then a QSEHRA may be a great option for your church. Meanwhile, if you have a church wants to extend health care benefits to part-time, hourly wage workers, and/or employees living abroad, then incorporating an ICHRA into your benefits program may be a great choice. 

Clergy Financial Resources offers several options to help you with your questions. We have listed three great options to get started. 

Pro Advisor I Tax Support
This support service provides you comprehensive answers to your questions. This support service is available at a flat rate of $45.00 for each 30-minutes session.

Learn more about Health Reimbursement Plans 
Reimbursements made to employees through an HRA are tax-free to the employee. Contact us to get your HRA plan started for 2021. 

Learn more about HR On-Demand
HR On-Demand provides unlimited phone and electronic support provided by a dedicated team of certified human resource professionals with years of experience. Start utilizing this valuable service and enroll in HR On-Demand today.

<  Back

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


Complete the request form and a clergy tax, payroll or HR advisor will contact you

Click Here