The Local Church, Pastors and Staff: Individual Health Insurance Loses Tax Benefit

One of the blessings of being a part of an association of churches, a denomination like the EFCA is that there are those who have gifts that can serve the church more broadly through churches. One of the ways this occurs in the EFCA is with retirement. Our FCMM Benefits and Retirement (at its origin in 1971 it began as a retirement plan for Free Church Ministers and Missionaries, which also became its name) not only provides a very good retirement plan and long term disability insurance program, but also give insights into staff benefits and church finances. Furthermore, they also keep us informed of other pertinent changes as they affect us.

In an important update, “Alert: Individual Health Insurance Loses Tax Benefit,” they inform us of an important change with significant implications regarding taxable income as it relates to individual health insurance premiums.

Taxable Income May Increase If Your Church Reimburses Health Insurance Premiums

As part of the implementation of the Affordable Care Act, only group health insurance premiums are eligible for pre-tax benefit starting in 2014. For the pastor or church staff member who obtains individual insurance (include Exchange plans), whether paid by the church or reimbursed by the church, this will likely result in a higher tax liability. Both income tax and Social Security/Medicare tax will be payable on this benefit amount, and the amount should be included next year in your 2014 W2s and tax returns.

Some congregations may consider covering this need by adjusting compensation, but the tax liability will be borne by the staff member in any event.

If you have any questions, please go to the FCMM Benefits & Retirement website as they are monitoring developments and posting updates. If you have further questions, give them a call. They are here to serve pastors, those in pastoral and other church-related staff ministries, and the local church.

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