No matter who you are, or where you are on life's journey, you are welcome here. United Church Of Christ - Massachusetts Conference
No matter who you are, or where you are on life's journey, you are welcome here.

Credit for Small Employer Health Insurance Premiums

Small employer health insurance premiums credit worksheet

Church Alliance Summary

To: Treasurers

From: Rev. Karen McArthur
Date: April 3, 2014
Re: Credit for Small Employer Health Insurance Premiums

As a part of the Patient Protection and Affordable Care Act signed into law by President Obama in March 2010, small employers may qualify for a refund of a portion of the health insurance premiums they have paid, beginning January 1, 2010. This refund may be claimed by filing IRS Forms 8941 and 990-T.

This is the fourth year that this credit has been available. Note that after this year, only employers who purchase insurance from their state exchange will be eligible for the credit, and then only for two consecutive years. 

The spreadsheet and tax forms for the 2013 Tax Credit have been updated. The spreadsheet will work for any state, using a drop-down menu to access the average health insurance premiums for that state. Also note that the data sheet asks for the percentage of each plan that the employer pays, along with the number of months the employer paid for insurance for each employee. This allows the spreadsheet to calculate the amount the employer would have paid if the insurance cost was the same as the state average premiums.

This memo, along with the attached spreadsheet, should provide the information needed to calculate the figures required for both forms for 2013. However, it includes a standard disclaimer:

This memo and spreadsheet seek to provide current and accurate general information for churches regarding the Small Employer Health Insurance Premiums Credit. However, if you are seeking tax advice regarding your church, you may wish to consult an accountant who can review your situation personally and offer her or his professional and specific advice to your congregation.

The accompanying documents can be accessed through the following links:

  • A spreadsheet for calculating the data for each line worksheet
  • A summary prepared January 6, 2011 by the legal team of the Church Alliance, which is made up of the CEOS of all denominations in the Church Benefit Association. (Note that the heading on each page is dated 1/6/10 in error.) This 8-page summary provides a detailed explanation of the tax credit, as well as who is eligible to claim it (click here).

To qualify for the tax credit, an employer must:

1) Pay for a portion of its employees’ health coverage.
     a. The employer’s portion must be at least 50% of the premium for single (employee-only) coverage.
     b. The percentage must be uniform for all covered employees – that is, if you pay 100% for the full-time pastor’s insurance, you have to pay 100% for every full-time employee unless they have waived coverage. Note that for 2010 only, the percentage does not have to be uniform as long as it is above 50%.

2) Have fewer than 25 full-time equivalent employees

3) Have non-clergy average wages per full-time equivalent employee of less than $50,000

4) Make federal tax deposits for federal withholding or Medicare (employee portion and employer portion)

The attached spreadsheet will allow you to check to see if your church is entitled to a credit. It will calculate the amount of the credit and generate the line-by-line figures for IRS Form 8941 and IRS Form 990-T.

IRS Form 990-T is due by May 15th for those with a fiscal year ending December 31st, or 4.5 months after the fiscal year end. No matter when your fiscal year ends, the tax credit is for premiums paid between January and December.

Please note that only one form 990-T and 8941 may be filed for a legal entity. If you operate a nursery school or thrift shop or other program that you consider to operate independently of the church, you should verify that the school or shop is indeed a separate legal entity before filing these forms. Filing two sets of forms for one corporation or unincorporated association would result in inaccurate information being filed with the IRS.

If you do not qualify for a tax credit for this year, the spreadsheet may help you to determine whether any personnel policy changes in the future would make a difference in the calculation of your tax credit.

  • For example, a small church may not qualify for the tax credit if federal withholding tax is minimal. This may occur if the pastor pays his or her federal taxes through estimated quarterly payments. However, if the pastor were to choose voluntary federal withholding, it could make a difference to the church of over $3,000.
  • For example, a church with a full-time pastor, .33 FTE administrator, .25 FTE organist, and full-time custodian that offers health insurance to its pastor only, and therefore does not offer a uniform benefit and does not qualify for the tax credit may find that offering that coverage uniformly to all employees who work half-time or more results in a $4,500 tax credit.

I hope this information is helpful to you and your congregation. If you have further questions, please contact Karen McArthur at karen@congregationalfinance.com.

***This work was made possible by contributions to the MACUCC Friends of the Conference Fund.***
 

 

 

 

 

 

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