If your church or ministry utilizes an Employer Payment Plan (EPP) or a stand-alone Health Reimbursement Arrangement (HRA) to pay for or reimburse employees for all or a portion of the cost of their health care premiums, please be aware that the Affordable Care Act narrowed the availability of this benefit to employers purchasing group plans coverage only. This change could affect your employees’ taxable wages as reported on the W-2 forms you are issuing for tax year 2014.
Prior to implementation of the ACA, EPP or stand-alone HRA reimbursements or payments were allowed to be excluded from an employee’s gross income. Beginning with tax year 2014, an employer is no longer allowed to use an EPP or stand-alone HRA to pay for the purchase of individual policy health coverage. So any payments or reimbursements you made on an employee’s behalf for an individual policy should be classified as income on their W-2 forms.
However, employees insured through GuideStone Personal Plans coverage are not subject to this change. Because the IRS classifies all GuideStone coverage, including Personal Plans, as group plans coverage, any EPP or HRA reimbursements or direct payments you made to or reimbursements you gave to an employee may still be excluded from that employee’s gross income as reported on their W-2 form.
For those employees insured through any other health provider, you may no longer use an EPP or stand-alone HRA to pay for the purchase of an individual health policy. However, you are still allowed to pay all or a portion of the coverage. Subsequently, any money you reimbursed your employees to pay for their health coverage will count as taxable income on those employees’ W-2 forms.
Disregarding this government ruling could result in the IRS imposing fines on your ministry.
The Department of Labor offers additional details to help you comply with this new provision.