Excellent Advice on the Healthcare Act

By Raul Rivera

The Affordable Care Act is now in full swing and nearly every person in America will be required under penalty of law to purchase health insurance that is compliant with the law.  Many churches want to know if there is anything (within the law) that they can do to keep costs down and still help their pastors and staff get a good healthcare policy.  Below are 2 steps that will help you keep costs down and reduce taxes, as well.

1. If your church has less than 50 employees, the church will not have to provide health insurance.  It may be best to not provide group healthcare insurance.
   
2. By letting the pastor or staff member find his/her own healthcare insurance on the exchange or through any other method, it will save the church and the pastor or staff member a ton of money.  The United States Department of Labor published “Technical Release No. 2013-03” and stated that if you receive insurance through your employer, you are not eligible for the insurance premium subsidy.  What does this mean?  Under the new law, most people when filing their tax return will qualify to receive a tax refund based on their income and family size.

Example of a pastor and a church

The church desires to pay the pastor’s health insurance.  Pastor X is married with three children.  The church has been paying Pastor X a total salary package of $40,000.00.  The new law requires Pastor X to purchase health insurance.  After going on the healthcare exchange at healthcare.gov, he will have to pay $10,493.00 in healthcare insurance premiums under a silver plan.  According to the subsidy calculator, he will qualify for a subsidy of $9,008.00 when he files his tax return, and he will receive a refund of $9,008.00, making his total out-of-pocket health insurance costs $1,485.00.  The church board approves to give him a raise of $1,485.00.  

Had the church chosen to cover his insurance under an employer-provided health insurance plan or a medical reimbursement plan, the pastor would lose his income tax refund subsidy and the total costs to the church would have been $10,493.00.

Changes in the law and medical reimbursements

A change in the law will now force most churches and employees to abandon medical reimbursement programs.  Under section 105(b), a church could simply allow a pastor or staff member to purchase his or her own health insurance and then reimburse the pastor or staff member tax-free.  Now, under the new healthcare law, if a church reimburses the pastor or staff member, he/she will not be allowed to receive a refund on his or her tax return under the subsidy program. 

Closing word

Writing on health insurance these days is very difficult.  Because of the Affordable Care Act, health insurance has become a political hot topic.  This article is written from a financial stewardship perspective and does not give any consideration to fiscal or political impacts.  I will continue to issue updates as the law matures.