Employers that filed 250 or more W-2 forms in 2011 will be responsible for reporting to employees the total cost of their group health benefit plan coverage on their 2012 W-2 forms issued in January 2013. This reporting requirement is informational only and does not mean that coverage will be subject to income tax.
On Jan. 4, 2012, the IRS issued Notice 2012-9 on the W-2 Reporting Requirement of the Patient Protection and Affordable Care Act. See how this recent notice and the W-2 requirement may affect your clients filing more than 250 W-2 forms in 2011.
Reporting Requirements Employers that are required to file fewer than 250 W-2 forms in 2011 will not be required to report the cost of health coverage under the Patient Protection and Affordable Care Act. This transition relief will continue until further guidance is issued. Any additional guidance will not apply to any calendar year beginning within six months of the date the guidance is issued.
Employers are not required to report the cost of health benefit coverage on any W-2 forms furnished to employees prior to January 2013.
It’s important to note that only covered employees that elect the coverage and pay the premiums or contribution amounts will receive cost of coverage information on their W-2 forms. For example, if a husband and wife work for the same company and are covered under the same health benefit plan, and the husband signed up for the plan and pays the premiums, he is considered the covered employee. Only the husband, in this case, would have the cost of coverage reported on his W-2. The wife is considered a beneficiary or dependent on the plan and would not have the cost of coverage on her W-2.
Calculating Cost of Coverage The cost of coverage generally includes both the portion of the cost paid by the employer and the portion of the cost paid by the employee, regardless of whether the employee paid for that cost through pre-tax or after-tax contributions.
Coverage that Does Not Need to be Reported Notice 2012-9 confirms that applicable employer-sponsored coverage does not include:
Coverage for excepted benefits under the Health Insurance Portability and Accountability Act (HIPAA) (such as long-term care, accident, disability income, liability and supplemental liability insurance, automobile medical payments, and workers’ compensation insurance)
Coverage for a specific disease or illness or hospital indemnity insurance
Coverage provided by the federal government, state government or agency of the government under a plan that is maintained primarily for members of the military and their families
Coverage under a self-funded plan that is not subject to any federal continuation requirements Consolidated Omnibus Budget Reconciliation Act (COBRA), Public Health Services Act (PHSA) continuation, Federal Employee Health Benefits Program (FEHBP) continuation, such as a group health benefit plan sponsored by a church
Coverage under a health reimbursement account (HRA)
Contributions to a health savings account (HSA) or Archer medical savings account (MSA)
Salary reduction contributions to a health flexible spending account (FSA) unless the amount of the FSA benefit exceeds the salary reduction election. In this case, the reportable cost would include the amount that exceeds the salary reduction election.
Coverage under a “stand-alone” dental or vision plan if the plan satisfies the requirements for being excepted benefits for purposes of HIPAA
Coverage for employee assistance program (EAP), wellness program, or on-site medical clinic, if that employer does not charge a premium for this type of coverage under COBRA
New Affordable Care Act Requirements:
There are new requirements according to the federal Patient Protection and Affordable Care Act (PPACA). The PPACA includes certain rules and standards designed to help members understand their health coverage easily and determine the best health insurance options. As a result, health plans and group leaders will be required to provide a stand-alone document known as the Uniform Benefit Summary, which provides a summary of the member’s health insurance benefits. This document allows members to do an “apples to apples” comparison of benefit plans available to them. Also, health plans and group leaders must provide the uniform glossary of common health insurance terms.
Uniform Summary to Group Leaders: Effective March 23, 2012, health plans are required to provide a Uniform Benefit Summary to a group leader upon application or within one week of their request for information. Health plans must provide the form each year at renewal.
Uniform Summary to Members: Effective March 23, 2012, a summary must be provided at the following times and under the following circumstances to plan beneficiaries/members:
Upon request, but in no event later than seven days after the request
To special enrollees within seven days of a request pursuant to a special enrollment right according to HIPAA
No later than the first date the member is eligible to enroll
At renewal, 30 days prior to the renewal date
In a culturally and linguistically appropriate manner
Penalty for not providing: There is a penalty of $1,000 per day per enrollee plus possible excise taxes, for not providing the Uniform Benefit Summary as directed.
We are monitoring this new requirement closely and we will keep you updated as it develops. A letter will be mailed to group leaders informing them of this change.
Employers will be responsible for reporting to employees the total cost of their group health benefit plan coverage on their W-2 forms under the Patient Protection and Affordable Care Act. The reporting requirements are expected to apply to the 2012 W-2 forms, which is information employers must report to employees in January 2013.
This requirement is informational only and does not mean that employer-provided coverage will become taxable. Employers filing fewer than 250 W-2 forms in 2011 will not be required to report the cost of coverage on any forms furnished to employees before January 2014.
Some benefits are not subject to the W-2 requirement:
Coverage under an HRA, amounts contributed to an HSA or an Archer MSA, as well as salary reduction contributions to a health FSA.
Coverage under a self-funded plan that is not subject to any federal continuation requirements (COBRA, PHSA continuation, FEHBP continuation), such as a group health benefit plan sponsored by a church.Coverage provided by the federal government, state government or agency of the government under a plan maintained primarily for members of the military and their families.
Coverage for a specific disease or illness or hospital indemnity insurance.
On Thursday, President On Thursday, President Barack Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4; 1099 Act), which repeals both the expanded Form 1099 information reporting requirements mandated by last year’s health care legislation and also the 1099 reporting requirements imposed on taxpayers who receive rental income enacted as part of last year’s Small Business Jobs Act (PL 111-240). The Senate approved the bill on April 5, and the House voted in favor of it on March 3.
The Senate has voted to repeal the health care overhaul’s 1099 tax reporting requirements, finally ending months of debate and votes over a provision that, by the end, had few defenders. The 87-12 vote on a bill passed earlier by the House gives President Barack Obama the first opportunity to sign or veto a bill repealing a piece of his signature law. He’s expected to sign it despite concern over how to replace the money the provision would have raised.
The IRS has determined that the change in inflation was not significant enough to result in adjustments to the 2011 limits on Health Savings Account contributions. Those with single, or self-only, coverage may contribute up to $3,050 for 2011. Those with family coverage are eligible to contribute up to $6,150. The catch-up contribution for those age 55 and older will also remain the same at $1,000. All types of contributions (pre-tax, post-tax, third-party contributions, etc.) apply to the annual contribution limits.
Additionally, for a health plan to qualify as a “high deductible health plan” for the 2011 calendar year, the health plan will have, at minimum, an annual deductible of $1,200 for single coverage and $2,400 for family coverage. The annual out-of-pocket maximum is no more than $5,950 for single coverage and $11,900 for family coverage.
For more information on the 2011 contribution limits or plan qualifications please click here.
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