Q&A: Can We Give Additional Income to a Church Employee Who Opts Out of Our Medical Plan?
Q&A: Can We Give Additional Income to a Church Employee Who Opts Out of Our Medical Plan?
Increasing an employee’s paycheck in lieu of participation may jeopardize your medical insurance plan for all participants.

My church has an employee who is covered by his spouse’s medical insurance plan. Is it okay to give a stipend to an employee who declines our plan so long as it is reported as taxable income?

The answer is maybe. You may not offer a cash or benefit option to employees who choose not to participate in your group health insurance plan as a general choice. Doing so—increasing an employee’s paycheck in lieu of participation in your plan—may jeopardize your medical insurance plan for every participant by making the benefit taxable for all of your employees. There are ways to structure an “opt out” payment in your medical benefit plan that complies with the ACA and does not jeopardize the plan benefits if the employee participates in a spouse’s ACA-compliant group health plan The church should also examine whether it may make the opt-out payment to its Section 125 plan (cafeteria plan) to preserve the tax benefits of the plan. Unless the tax benefits are preserved through the use of the Section 125 plan, the opt-out payment is taxable.

Log In For Full Access

Interested in becoming a member? Learn more.

Related Topics:
Posted:
July 22, 2019
View All
from our store
Church Finance

Church Finance

Learn about budgeting, financial reporting, tax compliance, insurance coverage, and more.
2019 Church & Clergy Tax Guide

2019 Church & Clergy Tax Guide

Find comprehensive help understanding United States tax laws as they relate to pastors and churches.
Best Practices for Technology Usage

Best Practices for Technology Usage

Establish policies and best practices to govern the use of technology for church staff.
Politics and the Church

Politics and the Church

Tax and legal guidelines faith-based organizations need to know before jumping into the political fray.

ChurchSalary

ChurchSalary

Experience a whole new way to set compensation. Eliminate the guesswork – get access to detailed compensation reports in just minutes.