Jump directly to the content
Addressing Church-Paid Medical Insurance Benefits

Addressing Church-Paid Medical Insurance Benefits

How the Affordable Care Act views the tax treatment of these payments.

Prior to the enactment of the Affordable Care Act, many employers provided health benefits for their employees by paying health insurers directly for the cost of private health insurance, or by reimbursing employees for the substantiated cost of insurance premiums. The amounts paid by employers under such arrangements were nontaxable fringe benefits under section 106 of the tax code, which states that, with some exceptions, "gross income of an employee does not include employer-provided coverage under an accident or health plan."

The IRS affirmed the tax-free status of these arrangements in a 1961 ruling. It concluded that if an employer reimburses an employee's substantiated premiums for non-employer sponsored medical insurance, the payments are excluded from the employee's taxable income under section 106. IRS Revenue Ruling 61-146. The IRS added that this exclusion also applies if the employer pays the premiums directly to the insurance company.

Are these common and longstanding arrangements affected by the Affordable Care Act? Can employers continue to treat their payment of the health insurance premiums of employees under individual health insurance policies as a nontaxable fringe benefit? If they pay some or all of the premiums of their employees' private health insurance, are its payments a nontaxable fringe benefit as in prior years? And what about churches that drop their health coverage in favor of what they assume will be a lower cost alternative of paying some or all of their employees' premiums for insurance coverage purchased on a state exchange? Is this a nontaxable fringe benefit?

Article Preview

This article is currently available to ChurchLawAndTax.com subscribers only. To continue reading:

LoginorSubscribe
Related Topics:
Posted:
March 11, 2014

Related Resources

See All
from our store
Essential Guide to Managing Risk for Church Boards

Essential Guide to Managing Risk for Church Boards

Churches take on risks that can create legal liabilities; become good risk managers.
Medical Emergency Preparation

Medical Emergency Preparation

Is your church ready for a medical emergency?
Insuring Your Church Staff

Insuring Your Church Staff

Increase your awareness of the extended insurance coverage every church needs.
Launching a Business at Church

Launching a Business at Church

Information on the legal, insurance, and tax implications a business poses to a church. 

Ratings & Comments

Average User Rating: Not rated

Displaying 1–3 of 4 comments

King

April 22, 2014  1:57pm

We have the same situation -- one of our ministers desires to be covered by her husband's plan and is requesting reimbursement. Her husband is covered by a business with large group plan -- is reimbursing her allowed under new regulations?

Report Abuse

Karen R

April 15, 2014  12:17pm

I am in the same situation, also. I hope someone can give us some clarification. Thanks.

Report Abuse

EMORY K GASKINS

April 08, 2014  4:26pm

Great question Ken. I am in the same situation. I hope someone answers.

Report Abuse
browse
Follow us:Church Law & Tax on FacebookChurch Law & Tax on TwitterChurch Law & Tax RSS FeedsChurch Law & Tax on Youtube

Shopping