ICHRA for Churches: The ERISA Exemption Nobody's Talking About

Do not assume that an organization or its ICHRA is exempt from ERISA. Church-plan status and the treatment of a particular arrangement depend on the governing facts, documents, organizational relationships, and any election.

So what happens when you try to set one up?

Many ICHRA vendors skip this question entirely. And unless your advisor has specific experience with church plan law, they may not know to ask it. Church administrators are often left piecing together answers from Google searches written for tech startups.

Here’s what you actually need to know.

Church Plans Stay Exempt — But Rules Still Apply

Under ERISA Section 3(33), your church plan remains exempt from ERISA even when you establish an ICHRA. You keep the standard exemptions:

• Form 5500 treatment requires plan-specific confirmation
• ERISA and other fiduciary or governance duties require plan-specific confirmation
• Claims-procedure requirements require plan-specific confirmation
• Federal and state continuation requirements require plan-specific confirmation
• No ERISA preemption of state insurance law

But exemption from ERISA doesn’t exempt you from everything. Your church ICHRA must still comply with:

• ACA market reform requirements through the Public Health Service Act
• IRS rules on eligible expenses, substantiation, and reporting
• 90-day advance notice before each plan year
• Employee attestation requirements (employees must prove they have individual coverage)
• ACA employer mandate if you have 50+ full-time equivalents

That last point catches churches off guard. ERISA exemption doesn’t equal ACA exemption. If your church has 50+ full-time equivalent employees across all campuses, schools, and ministries, you’re an Applicable Large Employer subject to the employer mandate.

Federal COBRA Goes Away (But Michigan Mini-COBRA Might Stay)

Here’s one genuine advantage: churches are exempt from federal COBRA for their ICHRA.

Secular employers with 20+ employees must offer departing workers continued ICHRA reimbursements. Churches skip this requirement entirely.

But Michigan’s mini-COBRA law may still apply. Michigan requires continuation coverage for employers with 2-19 employees. Whether ICHRA qualifies as a “group health plan” under Michigan’s mini-COBRA statute is unclear. Your legal counsel should review this before assuming you’re exempt.

The Health Sharing Ministry Wall

This creates the most friction in church ICHRA conversations.

Many church employees use health sharing ministries like Medi-Share, Samaritan Ministries, or Christian Healthcare Ministries. These align with congregational values and have grown significantly over the past decade.

Health sharing ministries are not insurance. They are not minimum essential coverage under the ACA. Employees enrolled in health sharing ministries cannot participate in ICHRA.

ICHRA requires every participating employee to maintain individual health insurance — a qualified health plan from the marketplace or off-exchange. Health sharing ministries don’t qualify.

Staff members using Medi-Share or Samaritan must either:

1. Drop their health sharing ministry and enroll in marketplace coverage to get ICHRA benefits
2. Keep their health sharing ministry and opt out of ICHRA — receiving no employer health benefit

This is a pastoral conversation, not just an HR decision. Staff chose health sharing ministries for faith-based reasons. Requiring them to switch to commercial insurance for employer benefits needs sensitivity and clear communication.

For the full breakdown, see [Why Your Church Employees Can’t Use Medi-Share with ICHRA].

Clergy Tax Status Adds Another Layer

Ministers have dual tax status that affects ICHRA:

• Employee for income tax purposes
• Self-employed for Social Security and Medicare (SECA) purposes

Housing allowance. A minister’s housing allowance (IRC Section 107) excludes income tax but not self-employment tax. ICHRA reimbursements exclude both. The benefits operate independently, but your payroll provider must handle both correctly.

Self-employed health insurance deduction. Ministers considered self-employed for SECA may be eligible for the self-employed health insurance deduction. If a minister receives ICHRA reimbursements, they cannot also claim the self-employed health insurance deduction for the same premiums. This is either/or — not both.

Denominational coverage. Some ministers receive health coverage through denominational providers — GuideStone, Board of Pensions, Reformed Benefits Association. If a minister has denominational coverage, the church may use ICHRA to reimburse the minister’s share of denominational premiums, depending on plan structure. This requires careful plan document drafting.

When Denominational Plans Compete With ICHRA

Many West Michigan churches participate in denominational health programs rather than commercial group insurance. The Reformed Benefits Association serves Christian Reformed and Reformed Church in America congregations across the region.

ICHRA might work if: - Denominational plan costs are rising faster than individual market alternatives - You have mixed ordained and lay staff with different coverage needs - Some employees prefer choosing their own plans - Your church is too small for denominational plan participation requirements

ICHRA probably doesn’t make sense if: - Your denominational plan offers strong benefits at competitive rates - Most staff are satisfied with current coverage - The denominational provider bundles health with retirement, disability, and counseling services - Administrative simplicity is a priority for a small church office

Your ICHRA Evaluation Process

1. Count your full-time equivalents. Include all employees across every ministry, campus, school, and affiliated entity. At 50+ FTEs, you’re an Applicable Large Employer with affordability requirements.

2. Survey current coverage. Find out who uses health sharing ministries, who has spousal coverage, who uses denominational plans, and who has no coverage. This shows how many employees would actually benefit from ICHRA.

3. Check Michigan individual market options. Premiums vary significantly by rating area. What works in Kent County may not work in rural counties with fewer carriers. Review available plans at Healthcare.gov for your specific area.

4. Run a cost analysis before choosing a path. Before assuming ICHRA or a group plan is the answer, determine whether employer-sponsored coverage even makes sense for your staff. Many church employees — especially part-time or lower-income workers — qualify for federal marketplace subsidies. Offering employer coverage can actually disqualify them from those subsidies and make their situation worse. In some cases, a stipend approach is more effective. For churches with a mix of salaried pastors and hourly support staff, it may make sense to offer a group plan for one class and a stipend strategy for the other. The difference is in the details — that’s why working with a true health insurance advisor is key.

5. Address health sharing ministries upfront. If multiple staff use Medi-Share or similar programs, this must be part of the initial conversation — not a surprise after plan setup.

6. Work with someone who knows church plan law. The intersection of ERISA exemptions, ACA requirements, clergy tax status, and ICHRA compliance requires specialized knowledge that goes beyond standard benefits advising.

The Reality Check

ICHRA works well for churches — especially smaller congregations that have never offered health benefits. The 83% of ICHRA adopters who never previously offered coverage include many small and mid-sized churches.

But the compliance picture is genuinely more complex for churches than secular employers. The ERISA exemption removes some requirements (Form 5500, federal COBRA) while leaving others fully intact (ACA affordability, IRS reporting, employee attestation). The health sharing ministry incompatibility requires honest conversation with staff.

This is where working with a specialized advisor matters. Church plan law sits at the intersection of ERISA Section 3(33), clergy dual tax status, ACA compliance, and individual market requirements — it’s not something you can navigate with general group insurance knowledge alone.

[Nexus Benefit Solutions is an independent employee benefits advisory firm based in Grand Rapids, Michigan, specializing in churches, ministries, nonprofits, and small to mid-market employers. We’re not affiliated with any carrier, vendor, or ICHRA platform. Our advisors will take the time to discuss your situation in detail. Schedule a call — no pitch, just clarity.]

Related Reading: - [ERISA Exemptions for Church Plans: What Your Benefits Broker Should Know] - [Health Insurance Options for Churches: Group Plans, ICHRA, and Denominational Providers Compared] - [Why Your Church Employees Can’t Use Medi-Share with ICHRA] - [Is Your Church Subject to the ACA Employer Mandate? How to Know]

Primary sources for church-plan status: IRS church-plan guidance and U.S. Department of Labor Form 5500 resources. A qualified legal adviser should apply current federal and state law to the organization and plan.