We are looking for ways to cut costs at our church because offerings are down. We are thinking of dropping the health insurance coverage for the church staff as a way to reduce expenses. Is this a good plan?
Generally, no. While your proposal does reduce church expenses, in my view, the approach does not demonstrate good stewardship of church resources. Some staff members may have difficulty in securing health insurance outside of the church group plan. Others may be able to purchase health insurance, but they may get no tax benefit from the health insurance expense because of the “7.5 percent times adjusted gross income” threshold on medical expense deductions on Schedule A. By providing health insurance on a tax-free basis (tax-free for both income and Social Security tax purposes), you are generally maximizing the stewardship of church resources. Other cost-cutting avenues should almost always be considered before eliminating health coverage for staff.
Dan Busby is a certified public accountant, acting president of the Evangelical Council for Financial Accountability (ECFA), and the author of the Zondervan Clergy Tax & Financial Guide.