Having a solo pastor means a lot of responsibilities that are usually shared among multiple pastors fall to just one person. With the amount of responsibility placed on a solo pastor, it’s not uncommon to see exhaustion and burnout.
Compensation for this important role usually falls to the congregation or a committee, but cost often prevents decision makers from offering health insurance coverage to their pastors as part of that compensation.
While offering health benefits can be costly, it helps your pastor stay healthy and focused on ministering for the long term.
If you’re looking for a way to take care of your pastor’s health care expenses, you have a few options. In this post, we’ll go over four of the most effective ways churches have secured a health benefit for their solo pastor.
1. Group health insurance
If your church has more than one employee, you can apply for group health insurance in any state. Some states also allow you to apply for group health insurance even if your solo pastor is the only employee.
Given the rising cost of group health insurance, though, this isn’t always an option for churches. Additionally, you may have to keep up with a participation rate, and the available plans might not work for all employees.
2. Informal stipend
When group health insurance isn’t an option, many small businesses and churches offer a health insurance stipend for health care costs. These churches simply offer the pastor a certain amount of money that the pastor can then use to spend on whatever health care services they like.
While this option is probably the easiest, there are several disadvantages. The biggest disadvantage is that the health care stipend would be taxable income and therefore wouldn’t be tax-free for your church or for the pastor.
This makes a difference because companies and employees save an average of 35 percent on taxes using a formal benefit. If you go with an informal stipend, you are missing out on those tax savings.
The other main challenge small businesses and churches see with stipends is that they’re unable to either require or confirm that the money is used only on health care.
3. One-person stand-alone HRA
A one-person stand-alone health reimbursement arrangement (HRA) is a good option if your solo pastor is your only employee. This benefit would allow you to reimburse your solo pastor up to a set allowance each month, tax-free.
Another advantage of the one-person stand-alone HRA is that the recipient can use their allowance only on health care expenses, so you can be sure they're using it correctly.
One thing to be aware of is that if your church has more employees than just the solo pastor, you would need to structure the eligibility requirements so that the pastor is the only one who qualifies for the benefit.
If your church has other employees aside from the solo pastor or is growing, a qualified small employer health reimbursement arrangement (QSEHRA) is a great fit.
The QSEHRA allows you to help your employees with their health care expenses, including individual insurance premiums. With this benefit, employees purchase the health services they need and you reimburse them for it tax-free up to their set allowance.
You must offer the QSEHRA to all full-time employees, and you can choose to offer it to part-time employees as well.
One thing to keep in mind is that you can't offer different amounts to different employees based on anything other than family status (whether the employee is married or has dependents).
For more information, see "Will the QSEHRA work for my church?"
If you’ve found that traditional group health insurance is not an option for your church and you need the tax savings you wouldn’t get with an informal stipend, a reimbursement benefit like the one-person stand-alone HRA or the QSEHRA is a great option.