Health plan for small church

A: Your approach is right on target and the cost should be no more than $12 per month regardless of the direction you choose. Feedback has been overwhelmingly positive from the churches where we have added a Health Reimbursement Arrangement to supplement the health insurance benefits. Keep in mind that the key distinction between an HRA and a FSA is the source of the money used to pay for benefits. HRAs are always paid for by the employer (the church in this case). FSAs are funded primarily by voluntary reduction of salary to cover health expenses that are not provided for in the employer's other health plan(s). Due to the intimate relationship between staff and "employer", churches tend to fund benefits as a separate issue from salary, so salary deduction plans are rare. For this reason, churches tend to use HRA plans more frequently than FSAs. The nature of the relationship between churches and their employees is likely one of the reasons that these benefit plans work out so well. These tend to be well-designed, well-communicated, efficient and responsive to the changing benefits needs of the employees. But if you are going to set up a FSA anyway, why not include other voluntary benefit options in a full scale Section 125 cafeteria benefit plan? The cost is the same regardless of the type of plan selected; $150 for setup and, if necessary, $150 for an independent health claims report. The claims accounting schedule is entirely up to you - annually or quarterly are most popular choices with small churches. More information and a worksheet to help you design the benefit plan are available at www.FreedomBenefits.org . There is also an article that summarizes the key differences between an HRA and a FSA.