If the church has a group health plan, you may want to consider a Health Flexible Spending Account (FSA).
A health flexible spending account (FSA) is a type of tax-advantaged medical account that reimburses employees for eligible health care expenses that are not covered by their health plans. Both employees and employers can contribute to a health FSA, subject to certain limits.
- FSAs are limited to $2,650 per year per employer. If you’re married, your spouse can put up to $2,650 in an FSA with their employer too.
- You can use funds in your FSA to pay for certain medical and dental expenses for you, your spouse if you’re married, and your dependents.
- You can spend FSA funds to pay deductibles and copayments, but not for insurance premiums.
- You can spend FSA funds on prescription medications, as well as over-the-counter medicines with a doctor’s prescription. Reimbursements for insulin are allowed without a prescription.
- FSAs may also be used to cover costs of medical equipment like crutches, supplies like bandages, and diagnostic devices like blood sugar test kits.
Churches should not offer a Health FSA if they do not offer major medical coverage unless the Health FSA only provides for limited-benefits. Standalone health FSAs (without having a major medical health plan) can only be offered to provide limited scope dental and vision benefits.
For more information, contact Clergy Financial Resources.
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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.
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