Pastor Health Insurance

[Super Mom]

Ok, I'm preparing a Pastor's W-2 for a church. The church has an accountable reimbursement plan and a housing allowance all passed and in the church minutes. My question is his health insurance paid by him. Can the church pay that per their minutes and me deduct that from his taxable income?

[Burke]

Not after the fact. The financial committee and the church's governing board must approve the payment of his health insurance as a fringe benefit prior to its being paid by the church.

[Super Mom]

They did approve it and put it in the minutes in early 2013, so is ok to expense what he paid for those months after?

[MAMalody]

Once it was approved, for 2013 TY you can handle it like an employee benefit and it would not be part of taxable income. This is not allowed in 2014.

[Super Mom]

Thanks! What must be done in 2014 to deduct from taxable? Is small church and pastor is only employee.

[MAMalody]

The only thing I can think of is to ensure it qualifies as a fringe benefit. The reimbursement option is out for 2014 so it must be a direct pay. Going from memory, I am not sure if anything other than a group policy will make it through ACA, however. The church could also let the pastor pay for it directly and simply gross up the amount like the do for a social security offset and let him pay the tax. I have not really had enough time to investiage this. Hopefully, someone on this board may have done so and can help out here.

[Super Mom]

I'm thinking as long as the church pays it directly is a fringe, and we don't need to set up a cafeteria plan. Anyone know?

[S T]

The only thing I can think of is to ensure it qualifies as a fringe benefit. The reimbursement option is out for 2014 so it must be a direct pay. Going from memory, I am not sure if anything other than a group policy will make it through ACA, however. The church could also let the pastor pay for it directly and simply gross up the amount like the do for a social security offset and let him pay the tax. I have not really had enough time to investiage this. Hopefully, someone on this board may have done so and can help out here.

Are you saying then for 2014 - the Church can not reimburse the Pastor's Medicare Premiums - of course which the Pastor will pay direct.

Sandy

[MAMalody]

That is correct. It would be taxable income to the pastor.

[S T]

Ok MAMalody

I think I found what you are referring to for year 2014

here is the link for anyone else http://www.clergytaxnet.com/Clergy%2...Facts/hra.html

but the quote I wanted related to the Mcare Premium Reimbursement

The Affordable Care Act (ACA) includes reforms that limit the availability of HRAs beginning in 2014. Under these reforms, most stand-alone HRAs will be prohibited. Also, HRAs will not be able to reimburse employees for their individual insurance policy premiums on a pre-tax basis. Any reimbursements for individual insurance premiums will be taxable income effective 01/01/2014. However, HRAs that are integrated with other group health coverage will continue to be permissible.

Any other thoughts?

Thanks

Sandy

[MAMalody]

I understand this is still supposed to be okay for MC. I am trying to confirm that now, but have not yet been able to do so.