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Healthcare: Employer Payment Plans No Longer Allowed Under ACA

The Affordable Care Act (ACA) contains important healthcare changes that affect all ministries. Many ministries use an Employer Payment Plan (EPP) to reimburse or directly pay for employee healthcare premiums. Under the ACA, this type of health plan fails to comply with reforms in most cases and is no longer allowed. Small- to medium-sized employers may face an excise tax of $100 per day, per employee, for violations.

If your ministry does not want to participate in a group health plan, but would like to continue subsidizing employee health insurance costs, consider the following:

  • Increase an employee’s salary to cover healthcare premiums. Note that the employer cannot stipulate that the salary increase only be used to pay for healthcare.
  • Avoid reimbursements or payments structured as taxable compensation. The most recent guidance from the IRS says that an arrangement under which an employer pays for some or all employee health insurance premiums on an after-tax basis outside of a group healthcare plan may be considered an EPP and does not comply with healthcare reforms.

Group insurance plans are available for employers with under 50 employees through the Small Business Health Options Program Marketplace (SHOP). All ministries should have their health plans reviewed by an attorney, tax professional or benefits specialist to be sure they comply with the rules.

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