Our church provides health insurance to our pastors but not to the other staff. We understand this is permissible under current law but what about under the new health care reform?
You have asked a very difficult question. Under current law, all self-insured health plans are already subject to nondiscrimination and coverage rules set forth in section 105(h) of the Internal Revenue Code. These requirements applied for many years before the health reform legislation was passed. Fully-insured plans (to which you are possibly referring) have not been subject to the nondiscrimination rules. If your current plan is a fully-insured plan, your practice of providing health insurance for pastors and not other staff is permissable.
However, the health reform legislation expands the scope of section 105(h) nondiscrimination and coverage rules for fully-insured plans:
- Fully-insured plans (except for fully-insured grandfathered plans) will become subject to the same rules as now apply to the self-funded plans effective for plan years beginning on or after September 23, 2010 (which is January 1, 2011, in the case of a calendar year plan).
- Fully-insured grandfathered plans, as long as they retain their grandfathered status, will not be subject to the section 105(h) nondiscrimination and coverage rules.
So, if you have a fully insured plan and you have not made any changes since the passage of the health care bill (March 23, 2009), your plan is generally grandfathered, so that the new nondiscrimination provisions would not affect you until you lose grandfathered status.
Dan Busby is a certified public accountant, president of the Evangelical Council for Financial Accountability (ECFA), and the author of the Zondervan Clergy Tax & Financial Guide.