Exec Summary - W-2 Reporting

Updated (August 2012):   2012 PPACA W-2 Reporting Requirements

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 Who:  All employers that provide "applicable employer-sponsored coverage" under a group health plan are subject to the reporting requirement.

 When:  For years 2012 and later, employers generally are required to report the cost of health benefits provided on the Form W-2.  Reporting for 2011 was optional.

 Transition Relief: Certain employers with respect to certain types of coverage will not be required to report the cost of coverage on the 2012 W-2’s (generally filed in early 2013).  Transition relief applies to the following:

         (1)   Employers filing fewer than 250 W-2’s for 2011;

(2)   Multi-employer plans;

(3)   Health Reimbursement Arrangements;

(4)   Dental and vision plans that either:

·         are not integrated into another group health plan or

·         give participants the choice of declining the coverage or electing it and paying an additional premium

(5) Self-insured plans not subject to COBRA continuation coverage or similar requirements;

(6) Employee assistance programs, on-site medical clinics, or wellness programs for which the employer does not charge a premium under COBRA continuation coverage or similar requirements; and

(7) Employers furnishing W-2’s to employees who terminate before the end of a calendar year and request a W-2 before the end of that year.

 

Reporting for the employers covered by the transition relief, and with respect to the types of coverage covered by the transition relief, is not required until future IRS guidance is provided, and in no event will reporting by these employers and with respect to these types of coverage be required on any 2012 Forms W-2

 

What:  In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. An employer is not required to issue a W-2 solely to report the value of the health care coverage for retirees or other employees or former employees to whom the employer would not otherwise provide a W-2.

 

Executive Summary:  PPACA requires employers to report the cost of coverage under an employer-sponsored group health plan. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. The value of the employer’s excludable contribution to health coverage continues to be excludable from an employee's income, and it is not taxable. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage.  IRS guidance on W-2 filings has been provided in several official Notices:

 Notice 2010-69, issued in fall 2010 to allow employers more time to update their payroll systems, made this requirement optional in 2011.

  1. Notice 2011-28 provided further relief by making this requirement optional for certain smaller employers.
  2. Notice 2012-9 provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012.

 The chart below illustrates the types of coverage that employers must report on the Form W-2.

 

Form W-2 Reporting of Employer-Sponsored Health Coverage

 

         Coverage Type

Form W-2, Box 12, Code DD

Report

Do Not Report

Optional

1.     Major medical

X

 

 

2.     Dental or vision plan not integrated into another medical or health plan

 

 

X

3.     Dental or vision plan which gives the choice of declining or electing and paying an additional premium

 

 

X

4.     Health Flexible Spending Arrangement (FSA) funded solely by salary-reduction amounts

 

X

 

5.     Health FSA value for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits

X

         

6.     Health Reimbursement Arrangement (HRA) contributions

 

 

X

7.     Health Savings Arrangement (HSA) contributions (employer or employee)

 

X

 

8.     Archer Medical Savings Account (Archer MSA) contributions (employer or employee)

 

X

 

9.     Hospital indemnity or specified illness (insured or self-funded), paid on after-tax basis

 

X

 

10.   Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer

X

 

 

       

 

 

 

11.   Employee Assistance Plan (EAP) providing applicable employer-sponsored healthcare coverage

Required if employer charges a COBRA premium

 

Optional if employer does not charge a COBRA premium

12.   On-site medical clinics providing applicable employer-sponsored healthcare coverage

Required if employer charges a COBRA premium

 

Optional if employer does not charge a COBRA premium

13.   Wellness programs providing applicable employer-sponsored healthcare coverage

Required if employer charges a COBRA premium

 

Optional if employer does not charge a COBRA premium

14.   Multi-employer plans

 

 

X

15.   Domestic partner coverage included in gross income

X

 

 

       

 

 

 

16.     Governmental plans providing coverage primarily for members of the military and their families

 

X

 

17.   Federally recognized Indian tribal government plans and plans of tribally charted corporations wholly owned by a federally recognized Indian tribal government

 

X

 

18.   Self-funded plans not subject to Federal COBRA

 

 

X

19.   Accident or disability income

 

X

 

20.   Long-term care

 

X

 

        

 

 

 

21.   Liability insurance

 

X

 

22.   Supplemental liability insurance

 

X

 

23.   Workers' compensation

 

X

 

24.   Automobile medical payment insurance

 

X

 

25.   Credit-only insurance

 

X

 

       

 

 

 

26.   Excess reimbursement to highly compensated individual, included in gross income

 

X

 

27.   Payment/reimbursement of health insurance premiums for 2% shareholder-employee, included in gross income

 

X

 

Other Situations

Report

Do Not Report

Optional

28.   Employers required to file fewer than 250 Forms W-2 for the preceding calendar year (determined without application of any entity aggregation rules for related employers)

 

 

X

29.   Forms W-2 furnished to employees who terminate before the end of a calendar year and request, in writing, a Form W-2 before the end of that year

 

 

X

30.   Forms W-2 provided by third-party sick-pay provider to employees of other employers

 

 

X

 

Actions Needed:  Employers should check with their accountants, payroll vendors, computer information systems, insurance brokers, agents, consultants, and insurers to prepare for the new W-2 reporting requirements effective for 2012 W-2 reporting.

 The information presented and contained within this article was submitted by Ronald E. Bachman, President & CEO of Healthcare Visions. This information is general information only, and does not, and is not intended to constitute legal advice. You should consult your legal advisors to determine the laws and regulations impacting your business.

 

ORIGINAL
W-2 Reporting Requirements for Value of Health Coverage

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Who:             Any employer providing health coverage for its employees.  Any individual receiving a W-2 for work and covered by an employer sponsored  insurance plan or a self-insured contract.

 

When:            Effective for tax years beginning after December 31, 2010.  The administration announced it will delay for one year (until January 1, 2112) the requirement for employers to report the value of an employee's health plan on tax forms. The White House says the extra time is necessary to give employers time to prepare to comply with the requirement.

 

Executive Summary:  The W-2 reporting of the value of health coverage has been delayed for one year.   Employers will be required to report the value of an employee’s health benefits on their W-2.   This means the aggregate cost of employer-sponsored coverage excluding the amount of any salary reduction contributions to a flexible spending arrangement.   The 2011 W-2 tax form includes an optional line for employers to report the cost of employer-sponsored health insurance coverage.

 

The information about health benefits added to employees' W-2 will not necessarily translate into higher income taxes.  Employers have the option of adding the value of the plans to 2011 W-2 forms and will be required to do so in 2012.   The goal is to inform employees about their benefits, not tax them.

However, starting in 2018 the law applies an excise tax on high-cost healthcare plans. The so-called 'Cadillac plans' will be subject to a 40 percent tax on excess benefits. The law defines such plans as costing more than $10,200 a year for individuals and $27,500 for families, with higher thresholds for risky professions.

 

                  Action  Required:    With a year’s delay employers will have additional time to meet the W-2

reporting requirements.  Most employers will want to discuss the requirements with their benefits department and payroll system providers.  Your broker or agent may be helpful if you may also need to get data from your insurer or TPA.    

 

 

The information presented and contained within this article was submitted by Ronald E. Bachman, President & CEO of Healthcare Visions. This information is general information only, and does not, and is not intended to constitute legal advice. You should consult your legal advisors to determine the laws and regulations impacting your business.
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