How will the new dependent age rule affect my taxes?
The exclusion applies only for reimbursements for medical care of individuals who are not age 27 or older at any time during the taxable year.
For example: Your dependent is on a GuideStone medical plan until turning age 26 on March 15, 2011. However, your employer offers a flexible spending arrangement for healthcare expenses, and you continue to receive reimbursements from the arrangement through the end of the year for healthcare expenses of your age 26 dependent. Because your dependent will not turn age 27 in 2011, those reimbursements are not included in your income for that tax year.
Do I have to start reporting the cost of providing my employees' health coverage on their W-2s?
If you provide medical benefits through GuideStone’s health plans, then no. Employers providing coverage through a self-insured church group health plan (including GuideStone coverage) will not be required to include employees’ medical coverage on their W-2s.
For employers providing medical coverage through all other providers, the cost of coverage must be reported on Form W-2 unless the employer issued less than 250 W-2s for the prior tax year. Employers will be required to report the aggregate cost of “applicable employer-sponsored coverage” on an employee’s W-2 for the 2012 tax year (issued in January of 2013). In general, this includes health coverage provided by an employer that is not included the employee’s gross income. The aggregate cost of an employee’s health benefits will not be included in the employee’s taxable income. Rather, the reporting will be a way to verify medical coverage for purposes of enforcing other provisions in the legislation.
It should be noted that this does not include FSA and HSA contributions, stand-alone dental/vision plans and other benefits excluded from reporting requirements. Employers making FSA or HSA contributions on behalf of employees may be required to report those contributions should they exceed certain amounts. For more guidance, contact your FSA or HSA administrator.
If this guidance is changed for later tax years, GuideStone will publish updated information.
Employer related: Will medical benefits be taxable?
No, the medical benefits won’t be taxable. The reporting will be a way to verify medical coverage for purposes of enforcing other provisions in the legislation.
Will a church whose pastor claims 100% of his salary as housing allowance be required to issue the pastor a W-2 for health insurance premiums?
If the pastor’s coverage is through a self-insured church group health plan (including GuideStone coverage), then no. His employer will not be required to include his medical coverage on his W-2. However, they may be required to report FSA or HSA contributions made on behalf of employees if they exceed certain amounts.
If his coverage is through any other carrier, it is likely that his employer will be required to report the value of health insurance coverage for him beginning with the W-2 issued in 2013 for the 2012 tax year.
What effect will the healthcare reform bill have on HSAs, HRAs and FSAs?
Healthcare reform will:
- Exclude the costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through a Health Reimbursement Arrangement (HRA) or health Flexible Spending Account (FSA) and from being reimbursed on a tax-free basis through a Health Savings Account (HSA). (Effective January 1, 2011)
- Increase the tax on distributions from an HSA that is not used for qualified medical expenses from 10% to 20% of the disbursed amount. (Effective January 1, 2011)
- Limit the amount of contributions to an FSA for medical expenses to $2,500 per year increased annually by the cost of living adjustment. (Effective January 1, 2013)
Does my church have to start sending 1099 forms to GuideStone or obtaining W-9 forms from GuideStone?
No. The provision in the healthcare reform law that required expanded 1099 reporting has been repealed. Standard reporting obligations for Form 1099 remain. These generally require payments totaling at least $600 in a single calendar year to a single recipient to be reported to IRS. Your church will not be required to start sending 1099 forms to or obtaining W-9 forms from GuideStone.
Will the CLASS Act affect the long-term care insurance I have with MetLife through GuideStone right now?
No. This will not affect the current MetLife long-term care plans GuideStone offers through LTC Financial Partners. Employers may contact LTC Financial Partners at 1-877-LTC-4478 (1-877-582-4478) with questions about the CLASS Act Program and its impact on long-term care insurance plans.
Do churches qualify to apply for the Small Business Healthcare Tax Credit?
Yes. On December 2, 2010, the IRS issued Notice 2010-82 announcing that the Small Business Health Care Tax Credit is available to churches and includes coverage purchased through self-funded denominational church health plans (including GuideStone health plans). GuideStone recommends that churches weigh all factors before determining whether to pursue the credit.
To be eligible, employers (including churches) must have fewer than 25 full-time equivalent employees whose average annual wage is less than $50,000. For 2010, employers must pay at least 50% of the insurance premiums for all enrolled employees. After 2010, employers must make uniform premium contributions of at least 50% for all enrolled employees.
The tax credit is of limited duration: from 2010 to 2013 for health insurance coverage, and from 2014 to 2016 for coverage purchased from a Health Insurance Exchange.
Additional important things to consider:
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Increased tax reporting requirements. Churches who qualify for and choose to claim the credit will be subject to some of the same enhanced tax reporting requirements now required of small businesses. It is wise for churches to take into account the additional reporting burden when evaluating whether to pursue the credit.
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The challenge of pastor tax status. Some pastors may be classified as “self-employed” for employment tax (SECA) purposes, which may present a challenge for small churches who wish to pursue the tax credit. Notice 2010-82 takes into account when clergy, who may be considered self-employed for employment tax (SECA) purposes, are to be counted as employees for purposes of the Tax Credit and how clergy compensation is to be treated for the Tax Credit’s average wage calculations. These additional requirements may add complexity to churches’ tax considerations.
For more information:
Note: This educational information is not intended as legal or tax advice. Ministers or churches with specific legal or tax questions should consult a legal or tax advisor who understands ministerial tax issues.
What’s the deadline to file Form 990-T to claim the Small Business Healthcare Tax Credit for the 2011 tax year?
The deadline varies according to your organization’s tax year. Note: If the regular due date falls on a Saturday, Sunday or legal holiday, file on the next business day.
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If your tax year follows the calendar year (January 1 – December 31), then the deadline to file for the 2011 tax year is May 15, 2012. You only note premium information from the calendar year (January 1 – December 31).
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If your tax year does not follow the calendar year, then you are required to file the 990-T by the 15th day of the fourth month following the end of your organization’s tax year. For example, if your tax year was July 1 – June 30, the filing deadline for the Form 990-T would be October 15, 2012. You will only note premium information from your tax year (not the calendar year).