By Gary Skeen
Year two enrollment in the Affordable Care Act has seen very few fireworks as compared to its launch. The open enrollment period was much shorter and many folks simply auto-enrolled or rushed through their decision before the Dec. 15 deadline.
The most common issue churches and their staffs seem to be dealing with this year are questions about subsidies, taxes and penalties. Many are also just realizing that individual policies cannot be a pre-tax benefit and the tax impact of this policy change is making the decision for coverage a new conversation in a lot of congregations.
In a blog from last September we discussed the narrow definition of what is considered a group plan that would be eligible for the pretax benefit. Figuring out if your church actually provides group coverage is key for making insurance decisions.
Since the IRS deemed employer pay healthcare plans are now considered a taxable benefit to employees (in Notice 2013-54), and the only way churches can receive a pretax benefit is through a group healthcare plan, knowing where your church falls in this situation is very important. For more details and information, you can link to our blog from last May.
Subsidies are another related issue that’s important for ministers and staff to understand. Tax season this year should see many people finding out that they should have received additional subsidies, or that they may owe additional taxes if they understated their incomes. You might refer to this blog from 2013 for more details.
But an important thing to emphasize is: the ministerial housing allowance should not be counted as income for determining subsidy eligibility.
For the first time when filling out your tax return this spring for 2014, you will have to answer a simple question about healthcare coverage. Did you or didn’t you have minimum essential coverage? If you did not have coverage last year, you will pay the higher of these two fees when filing your return:
- 1% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
- $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.
In 2015, the rates increase to 2% and $325 per person and in 2016, 2.5% and $695. If you have to pay the penalty, you will do so as a part of your 2014 tax return. If you’re uninsured for just part of the year, 1/12 of the yearly penalty applies to each month you are uninsured. If you’re uninsured for less than 3 months of the year, you will not be subject to the penalty.
The 2014 tax return question about coverage can also provide churches and religious organizations a ministry opportunity. If you have people in your congregation that answered no for coverage in 2014 and have not signed up for coverage in 2015, you may be able to help them with enrollment before the 2015 deadline. There are many resources online to become educated about healthcare and we hope that your church considers adding healthcare to the ministries you provide in your community.
Open enrollment for 2015 ends on February 15. After this date you can only enroll or change plans if you qualify for the special enrollment period, as defined by the government here. If your church is considering providing group coverage for the staff, there is no enrollment period and employees can cancel their policies if the employer decides to offer coverage at any time during the year.
We are still hopeful in the future that the small employer heath option (SHOP) will become a good source of heath care for churches, but it has not seemed to have the support of the providers in 2014 or 2015.
Many of our congregations and those we minister are finding healthcare coverage when it has not been available or affordable for them in the past. The Healthcare Market Place (exchange) is a central source for application and information about help for low income individuals and families. Since many are unaware of these services and medical crisis is a significant factor in poverty, please consider if you or your church could play an educational role in assisting folks with access to these programs through February 15 and again next year. The tax penalties continue to increase for some of these folks.
If when you begin working on taxes and you find out there are questions about subsides and your coverage — or if you still haven’t signed up for healthcare coverage THIS YEAR — I hope that you will contact me. Your benefits are our ministry at CBB, and if there’s ever confusion, or opportunities for education, please send an email or call 1-800-352-8741.
Gary Skeen is President of the Church Benefits Board, a ministry of the Cooperative Baptist Fellowship.