January 13, 2008

Accident and Health Plans Provided for Church Employees

In accordance with Internal Revenue Code Section 105, amounts received by employees under employer accident and health plans are excluded from Gross Income. This rule is also communicated by the IRS in its Publication 15-B (2008), Employer's Tax Guide to Fringe Benefits. Relative to churches and Christian ministries, the typical lone exception to this rule applies when the employer has established a "self-insured medical reimbursement plan that favors highly compensated employees." These plans typically reimburse employees for medical expenses not covered by insurance. For a church with a pastor as its sole employee, these rules are not applicable. Publication 15-B provides concise, understandable explanations of these rules.

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