The Internal Revenue Service (IRS) and Department of Labor (DOL) issued guidance (DOL technical release 2013-03 and IRS Notice 2013-54) that may impact how your church funds medical coverage for some employees. The guidance states that, effective July 1, 2015, organizations may no longer directly pay premiums for an individual health insurance policy [a health insurance policy for an individual or family purchased directly from an insurance company (an “issuer”) or through the Affordable Care Act’s Marketplaces (also called exchanges)] for an employee, nor reimburse an employee who purchases an individual health insurance policy with dollars that are excluded from the employee’s taxable income. These arrangements are sometimes called “Employer Payment Plans” [EPPs] or stand-alone health reimbursement arrangements (HRAs). Although non-taxed Employer Payments Plans and stand-alone HRAs are no longer permitted, an employer can create an Employer Payment Plan to directly pay the premium for an individual health insurance policy covering the employee—if the employer payments are considered taxable income (i.e., if the employee is taxed on the payments) and the arrangement satisfies a few other requirements: 1. No contributions are made by the employer, i.e., the payment is part of the employee’s taxable salary that is being forwarded by the employer to the insurance issuer. 2. Participation in the program is completely voluntary for employees. 3. The employer collects premiums through payroll deduction and remits them to the insurer without endorsing the program. 4. The employer receives no consideration (e.g., cash) other than reasonable compensation for administrative services rendered to collect the premiums. Source: Clergy Financial Resources
Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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