Q: Our church has several employees who opt out of group health insurance and instead elect to participate in a group “health sharing plan.” It is my understanding that any out-of-pocket health expenses incurred by an employee are eligible for a Flexible Spending Account (FSA), provided they are included on the Internal Revenue Service’s (IRS) list of eligible reimbursed expenses.
Could you please clarify if the monthly “subscription” or “membership” cost for a health sharing plan paid by these employees could be covered as an FSA reimbursement?
And, more generally speaking, are there any situations in which a church pays the membership fee for a health sharing plan as a part of any tax-free fringe benefit plan?
Flexible Spending Accounts (FSAs) provide tax advantages for employees to cover eligible medical expenses. This article breaks down what qualifies for reimbursement and how churches can navigate these guidelines effectively.
Key Takeaways:
- FSAs reimburse eligible medical expenses as defined by IRS guidelines.
- Health sharing plan membership fees are not typically FSA-eligible unless under specific self-insured arrangements.
- Churches must consult legal experts for compliance with health plan regulations.
FSAs are designed to reimburse employees for eligible medical expenses. But are membership fees or subscriptions to health sharing plans eligible for reimbursement? The short answer is no, except under specific self-insured arrangements. Here’s what you need to know about what is eligible for FSA reimbursement.
What Is Considered an Eligible FSA Expense?
Eligible FSA expenses are defined by the IRS and generally include costs directly related to medical care. Common qualifying expenses include:
- Co-payments and deductibles
- Prescription medications
- Medical devices, such as crutches or blood sugar monitors
- Dental and vision care
For a full list, refer to the IRS Publication 502, which outlines deductible medical expenses.
Are Health Sharing Plan Costs FSA Eligible?
Membership fees or subscription costs to faith-based health sharing plans are not considered “medical expenses” under IRS guidelines. As a result, these costs are typically ineligible for FSA reimbursement.
However, there may be exceptions if a church incorporates these plans into a qualifying self-insured health plan. For this to work, the church must draft a comprehensive health benefit plan that complies with the Affordable Care Act (ACA). Consulting a benefits attorney is essential to ensure compliance.
Potential Rule Changes on Health Sharing Plans
In 2020, the IRS proposed regulations that might redefine “insurance” to include health sharing plan arrangements, making them FSA-eligible. However, these proposed rules remain unpublished, leaving the long-standing guidance unchanged. Churches should stay informed about future regulatory updates.
Pro Tip: Ensure your FSA plan documents clearly define eligible expenses to avoid compliance issues.
Steps for Churches to Navigate FSA Guidelines
- Consult with a qualified benefits attorney when establishing self-insured health plans.
- Keep detailed records of employee health benefits and plan documentation.
- Regularly review IRS guidance and updates regarding FSAs and health sharing plans.
The following has been added to the original content to maintain accuracy and relevancy:
FAQs: Common Questions About FSA Reimbursement
- What medical expenses qualify for FSA reimbursement? Generally, expenses directly related to medical care, such as prescriptions, medical devices, and co-payments, qualify. Refer to IRS guidelines for more details.
- Can over-the-counter medications be reimbursed? Yes, over-the-counter medications without a prescription became FSA-eligible in 2020 under the CARES Act.
- Are gym memberships or wellness programs FSA-eligible? Typically, no. However, they may qualify if prescribed for a specific medical condition.
- Can churches include health sharing plans in FSAs? Only under specific self-insured arrangements that meet ACA compliance requirements.
Churches navigating FSA eligibility rules must remain vigilant about IRS guidelines. Whether managing traditional medical expenses or exploring innovative health plan strategies, understanding eligibility is crucial to ensuring compliance and maximizing benefits for employees.