Our church provides an allowance for our pastor or lay staff to buy their own health insurance. How should we be handling this allowance?
Some local churches provide their clergy or lay staff with cash allowances to purchase health insurance coverage outside of the NC Conference Blue Cross Blue Shield group health plan. Administration of this allowance must follow guidance issued by the Internal Revenue Service and Department of Labor, otherwise the local church may face excise tax penalties under the Affordable Care Act (ACA). Wespath Benefits and Investments (Wespath) has provided a summary of this guidance. For more information, visit Wespath’s Health Care Reform webpage.
Additionally for clergy, this allowance must be reported on line 2a.1 on the Clergy Compensation Worksheet. It is considered taxable income to them. Effective January 1, 2017, it is excluded from the pension calculation and continues to be included in the apportionment calculation.