IRS notice brings good news for small churches

By Gary Skeen

Finally, some good news for small churches struggling with tax issues associated with health care reimbursement for staff and employees: in a Feb. 18th notice, the IRS said it will not enforce the penalty to small employers that offer health care premium reimbursements to its employees.

Since the early 1960s, employers were able to directly pay for or reimburse employees for premiums of health insurance policies purchased by an employee without the employee being taxed. But on January 1 last year, the favorable treatment changed under the rules of the Affordable Care Act, and those benefits were scheduled to be taxed.

Part of the confusion with the change is that employer-purchased (group) plans were not affected, only the individual policies purchased by employees. However, an employer’s plan that only covers one employee is exempt.

All employers should stop offering premium reimbursements as soon as possible. Enforcement is still in place for employers over 50 employees, however enforcement against small employers has been delayed until at least July 1, 2015.

The final caveat is Congress may still change the law, and/or the Supreme Court may invalidate it, so stay tuned.

One of my jobs as president of CBF’s Church Benefits is keeping you up to date about changes in benefits, such as this. One thought leader I regularly monitor is CapinCrouse, CPAs, and they produced this update which has a more detailed explanation on the IRS update and changes to ACA enforcement. You can find the article here.

If you have any questions or wish to discuss your church’s benefits, please contact me or the staff at CBF’s Church Benefits. You can reach us by sending an email or calling 1-800-352-8741.

Gary Skeen is President of CBF’s Church Benefits, a ministry of the Cooperative Baptist Fellowship.