Churches, Employees Should Consider ACA Tax Ramifications

CHICAGO, IL (December 16, 2014) — Churches may no longer reimburse employees for, or directly pay, the cost of individual health insurance policy premiums with either pre-tax or after-tax dollars due to provisions of the Affordable Care Act, says Christina Kempe, Bethany Benefits Service Coordinator.

As a result, employees must pay taxes on whatever funds they receive from the church to pay for those plans. “Paying employees for individual health premiums or requiring proof of insurance could trigger enormous penalties under IRS law,” Kempe said.

Employers and Employees are only allowed to use “pre-tax” dollars to pay for health insurance premiums if the employer offers a group health insurance plan such as Bethany Benefits, Kempe said.

If the church wants to assist a pastor or staff member in paying for their individual health insurance policy costs, the church may raise the person’s salary above the premium costs but cannot ask for or receive documentation about those costs, and the church must include the employee’s additional compensation in the employee’s gross income, Kempe said.

For more information, visit the Bethany Benefits website or email or phone Kempe at 773-907-3376.

Open enrollment in plans through the Market Exchange or in Bethany Benefits is available until February 15, 2015. To review the difference in offering a group health plan versus individual health plans, click here.

The Bethany program provides coverage for pastors, employees of local Covenant churches and regional conferences, conference centers and camps, Covenant pastors who work for voluntary employers of the Covenant Pension Plan, and denominational offices. Medical/dental coverage is available for employees who work a minimum of 20 hours a week.

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