As a convention, we seek to help meet the needs of our churches. As a church, you, in turn, seek to help meet the needs of your pastor and other ministry staff. One of the ways many of you care for them is through reimbursement for the premiums of health insurance policies. However, due to recent changes in government regulations through the Affordable Care Act (ACA), this may no longer be possible beginning July 1, 2015.
If you allow this practice, called Premium Reimbursement Plans, to continue after June 30, your church could be subject to a penalty under the ACA of $100 a day per participating employee. That could add up to an annual maximum penalty of $36,500 a year per participating employee!
That's the bad news. But here are some clarifications and suggestions of ways to deal with this new provision of the law so that you can avoid the penalties and still maintain the health care coverage that you want to provide for your employees.
First, you don't need to do anything if:
- You currently have a church/employer-purchased group health plan in place. The new regulations only apply to individual policies purchased by the employee that are reimbursed by the church or paid directly by the church (Premium Reimbursement Plans).
- You only have one employee that you are making or reimbursing the payment for an individual employee policy. You can still reimburse or pay for the employee's premium in this case, tax-free with no penalty.
Second, if you are currently out of compliance with the new regulation, you can get in compliance and avoid penalties by:
- Instituting a church/employer-purchased health plan. Healthcare.gov has plans you can review and any insurance broker is a potential source of plans as well. Also, Guidestone has just made available a church/employer-purchased health plan for a group as small as two people.
- Increasing the pastor or employee's taxable compensation to a level that will cover the cost of their health insurance (and tax exposure if you feel it's appropriate). In order for this approach to be in compliance, the pay increase needs to not be conditioned on purchasing health insurance.
Now is the time to take a look at your current practices and determine what, if any, corrective actions you need to take to get into compliance with the ACA and avoid those potential compliance penalties. Please know that we are here to help. If you have any questions or if we can provide any additional clarification, please contact either of us:
Rollie Richmond, HR Director
Jim Reed, Controller