Implementation guidance is now available from the General Board of Pension and Health Benefits for churches eligible for the Small Business Health Care Tax Credit. Please take time to review the implementation guide to see if your church qualifies – many of our churches will be eligible for this credit and the refund could be substantial to a church budget especially during these tough economic times. All churches are encouraged to review this if they have at least one lay person on payroll – even large churches may meet the guidelines!
Notice from the General Board:
The attached summary from the General Board, which contains examples and explanations, is meant to be an illustrative user’s guide for local churches regarding the small business health care tax credit (Tax Credit) contained in the Patient Protection and Affordable Care Act (PPACA).
The PPACA established the Tax Credit as an incentive for small employers to provide health insurance coverage to their employees. Qualified small employers (those with 25 or fewer employees and average wages less than $50,000), including tax-exempt organizations like local churches, may be eligible for the Tax Credit if they contribute a uniform percentage of at least 50% toward the cost of their employees’ health insurance. For tax-exempt organizations, the Tax Credit can be up to 25% of premiums paid. The Tax Credit will take the form of a refundable credit against the amounts the employer is required to withhold from its employees’ wages for federal income taxes and Medicare tax, plus the employer share of Medicare taxes (the credit is therefore also limited by these amounts).
As announced in an earlier document on the General Board website in December 2010, the Internal Revenue Service (IRS) published final guidance on the Tax Credit that included specific information about the eligibility of small church employers providing coverage under self-funded church plans. Small churches and church-related employers can qualify for the Tax Credit whether they obtain coverage through their denomination’s self-funded church health plan maintained by their denomination’s benefit board, a stand-alone church plan, or through an insurance company. The IRS guidance also addressed how to handle clergy compensation in determining eligibility and the amount of the credit available.
The full report from the Church Alliance Core Lawyer Working Group is provided here. This report was prepared by the Core Lawyer Working Group of the Church Benefits Association for the benefit of churches in denominational health plans, such as HealthFlex and other annual conference health plans in The United Methodist Church. Personnel from the legal department at the General Board were involved in drafting this document.
More information about the Tax Credit and how health care reform may impact the health plans of The United Methodist Church is available in the Health Care Reform section of the General Board website. Please submit any questions to email@example.com. You also can learn more about health care reform in general at www.healthcare.gov.