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.
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)
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?
In all likelihood, yes. Employers will be required to report the value of health insurance coverage for all employees beginning with the W-2 issued in 2012 for the 2011 tax year.
Employer related: Will medical benefits be taxable?
No, the medical benefits won’t be taxable but the cost of coverage must be reported on Form W-2. 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, “applicable employer-sponsored coverage” includes health coverage provided by an employer that is excludible from the employee’s gross income. GuideStone’s Personal Plans and Group Plans are “applicable employer-sponsored coverage.” "Applicable employer-sponsored coverage” does not include FSA and HSA contributions, stand-alone dental and vision plans and other excepted benefits.
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.
Employer related: Does the non-profit small employer tax credit apply to us?
According to the IRS, eligible small businesses can claim a tax credit starting with the 2010 tax year. Although both taxable (for-profit) and tax-exempt (non-profit) entities qualify for the credit, the IRS is still working to provide further clarity and information on what healthcare expenses are eligible for the credit and how to claim the credit.
GuideStone is working with other denominations through the Church Alliance to determine how churches participating in the GuideStone healthcare plans might best qualify for this tax credit. We will keep you up to date as more information becomes available.
Does my church have to start sending 1099 forms to GuideStone?
No, this new law does not apply to GuideStone products and services. According to a provision in § 9006(a) of the new law, payments for goods or services made to vendors who are 501(a) exempt entities such as GuideStone do not require 1099 reporting. However, your church is responsible for sending 1099s to vendors who are not 501(a) (or otherwise) exempt.
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.