Employees may apply for health coverage directly through the Health Insurance Marketplace, also known as the “Exchange”.
Employees must pay for this coverage on a after-tax basis. Beginning, 2014, your church may not provide its employees with a pre-tax reimbursement for the cost of coverage obtained through the Exchange. However, it may increase an employee’s wages by an amount equal to the cost of that coverage.
Any increase in wages for the cost of Exchange coverage must be included as income on the employee’s annual Form W-2 and is subject to federal, social security and state taxes. You may “gross up” the amount of the increase to offset the taxes due.
Your church cannot use a health reimbursement arrange (HRA) or an employer payment plan to reimburse premiums on a pre-tax basis.
< BackClergy 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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