PCORI Tax Payment Reminder: Deadline is July 31
July 7, 2015 at 1:46 pm | Posted in Affordable Care Act, Archer Medical Savings Account, Flexible Spending Accounts, PCORI | Leave a commentTags: ACA, Affordable Care Act, Patient Centered Outcomes Research Institute, PCORI, tax
1. Introduction
The Affordable Care Act imposes a tax on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute which is a federal institute designed to assist health care providers, consumers, and policymakers in making informed healthcare decisions and advancing the quality of healthcare delivery. Health insurers will roll their PCORI tax payments into their premium rate increases. The tax, required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan.
The PCORI tax is temporary. It is imposed on health insurance policies and self funded plans for each policy year ending on or after October 1, 2012, and before October 1, 2019.
2. Which Plan Pays the PCORI Tax?
Depending upon the nature of the coverage and health plan, the entity responsible for paying the PCORI fee will differ.
| Type of Coverage/Plan | Responsible PCORI Fee Paying Entity |
| Fully Insured Health Plan | Health Insurer |
| Self-Insured Plan | Plan Sponsor |
| HRA or FSA Combined with Fully-Insured Plan | The Plan Sponsor will pay the fee for each covered life under the HRA or FSA. The health insurer will pay the fee for each covered life under the health insurance policy. There can be two fee payments for the same lives. See note below about possible FSA treatment as an excepted benefit which would not trigger a PCORI payment. |
| HRA Integrated with Self Insured Plan | Plan Sponsor, but will not pay twice for the same lives insured under the Self Insured Plan and the HRA. |
| FSA Integrated with Self Insured Plan | Plan Sponsor, but will not pay twice for the same lives insured under the Self Insured Plan and the FSA. |
| COBRA | If COBRA coverage is fully insured, the health insurer will pay. If COBRA coverage is self-insured, the Plan Sponsor will pay. |
| Retiree Health Plans (RHP | If the RHP is fully insured, the health insurer will pay. If the RHP is self- insured, the Plan Sponsor will pay. |
The PCORI fee does not apply to Employee Assistance Programs, disease management programs or wellness programs if the program does not provide “significant benefits in the nature of medical care or treatment.” Finally, the regulations specifically exclude the following types of coverage from the self-insured PCORI fee analysis: excepted benefits under Internal Revenue Section 9832 (c); any insurance policy designed to cover employees working or residing outside of the United States; any Stop Loss or indemnity reinsurance policy.
IMPORTANT NOTE ABOUT FSA! : A PCORI fee is not payable on an FSA unless the employer provides a credit of, or funding of, at least $500. If the FSA is funded strictly by employee contributions and is paired with a major medical plan, there should be no PCORI fee since it would satisfy the IRS definition of an excepted benefit.
3. IRS PCORI Payment Chart
The IRS has provided a payment chart (link below) to assist plan sponsors in determining when their filing deadlines are for 2014 and 2015 and what the per person PCORI tax rate is. Plan years that concluded during 2014 have to file by July 31, 2015. Plan sponsors should note that the PCORI tax rate changed mid-year in 2014. Consequently, those filing for 2014 months from January through September 2014 will pay a rate of $2.00 while those ending in the October to December 2014 period will pay a PCORI rate of $2.08.
4. Ability To Deduct PCORI Tax Payment As A Business Expense
The IRS has announced that: “ The required PCORI fee will be an ordinary and necessary business expense paid or incurred in carrying on a trade or business and, therefore, will be deductible under § 162.” A copy of the IRS memo is here: http://www.irs.gov/pub/irs-utl/AM2013-002.pdf
5. More Information About PCORI
You can learn more about PCORI at the following IRS links:
Patient-Centered Outcomes Research Trust Fund Fee: Questions and Answers
DOL Sues Employer/Plan Sponsor for Approximately $500,000 and Removal of Health Plan Fiduciaries for Failure to Fund Health and COBRA Coverage and Pay Incurred Claims
December 26, 2013 at 11:51 am | Posted in COBRA, Compliance, Department of Labor, Employment Law, Flexible Spending Accounts, Health Care, Medical | Leave a commentTags: COBRA, department of labor, DOL, Employee benefit, FSA, health insurance, healthinsurance, Insurance
On December 18th, in Perez v. Home Valu, et al., the DOL sued a self insured health benefit plan, self insured dental plan, flexible benefit plan, COBRA plan, and the individuals responsible for its administration seeking recoupment of approximately $500,000.
On December 24, 2009 the self insured plans stopped paying benefit claims. On January 10, 2010 Home Valu stopped doing business because of financial pressures. All Home Valu benefit plans were formally terminated on January 22, 2010 although they were practically terminated on December 24 when the self insured plans stopped paying claims. Nevertheless, HomeValu continued to deduct approximately $12,000 in insurance premiums from employee paychecks in January 2010 and failed to apply those premiums towards health insurance. The Home Valu benefit plans did not pay approximately $490,000 in claims incurred in November and December 2009 and January 2010.
A copy of the DOL complaint can be found here:
http://www.dol.gov/ebsa/pdf/0-13-cv-03572.pdf
IRS Liberalizes Section 125 Election Change Menu for Non-Calendar Year Plans to Allow “Transition Relief” for Participants to Drop Coverage and Elect Coverage Through an Exchange
November 1, 2013 at 11:28 am | Posted in Affordable Care Act, Cafeteria Plans, Compliance, Federal Laws, Flexible Spending Accounts, Health Care, Health Insurance Exchanges, Health Insurance Marketplace, IRS, Medical, PPACA, Regulations | Leave a commentTags: "PPACA", ACA, Affordable Care Act, Cafeteria Plan, health care reform, health insurance, Health Insurance Exchange, Health policy, Insurance, internal revenue service, IRS, Obamacare, Patient Protection and Affordable Care Act
The IRS has announced that it will allow, subject to an employer’s amendment of its non-calendar year cafeteria plan, the decision of an employee to change his/her Section 125 Cafeteria Plan health care election to drop coverage from his/her employer and obtain coverage through a health insurance exchange created under the Affordable Care Act.
According to the IRS: “An employer may amend its § 125 cafeteria plan to allow an employee who elected to salary reduce through the § 125 cafeteria plan to pay for accident and health plan coverage under the § 125 cafeteria plan with a non-calendar plan year beginning in 2013 to prospectively revoke or change his or her election with respect to the accident and health plan once, during a limited period (for example, the first month of 2014 only rather than the entire plan year) without regard to whether the employee experienced a change in status event described in Treas. Reg. § 1.125–4.”
DOL ISSUES NEW FAQs REGARDING SBC REQUIREMENT FOR PLANS STARTING ON OR AFTER JANUARY 1, 2014: MANY WORDS…LITTLE CHANGE
April 24, 2013 at 2:58 pm | Posted in Affordable Care Act, Department of Labor, Essential Health Benefits, Flexible Spending Accounts, Health Care, Health Reimbursement Account | Leave a commentTags: department of labor, essential health care benefit, FSA, health insurance, HRA, Summary of Benefits and Coverage (SBC), third party administrators
On April 23rd DOL issued new FAQ guidance for the 2014 SBC requirement for SBC’s issued on or after January 1, 2014. Although the FAQs contain much discussion, there is little in the way of material change.
1. Does the Plan Provide Minimum Essential Benefits and Minimum Value?
The most significant 2014 change in the required template regulations, however, is that the SBC must disclose whether the major medical plan provides (1.) minimum essential benefits and (2.) satisfies the minimum value requirement of the Affordable Care Act? If you have a fully insured plan, your health insurer should be making the necessary attestation to the SBC. If you have a self insured plan, the plan sponsor or its TPA (if applicable) must add the attestation about either satisfying or not satisfying the “minimum essential benefits” and “minimum value” benchmarks under the Affordable Care Act. Moreover, if a health insurer or self insured sponsor cannot make the necessary 2014 modifications, they can satisfy the new SBC regulation by simply issuing a cover letter to all eligible employees with the following content:
- Does this Coverage Provide Minimum Essential Coverage?
The Affordable Care Act requires most people to have health care coverage that qualifies as “minimum essential coverage.” This plan or policy [does/does not] provide minimum essential coverage. - Does this Coverage Meet the Minimum Value Standard?
In order for certain types of health coverage (for example, individually purchased insurance or job-based coverage) to qualify as minimum essential coverage, the plan must pay, on average, at least 60 percent of allowed charges for covered services. This is called the “minimum value standard.” This health coverage [does/does not] meet the minimum value standard for the benefits it provides.
2. DOL will continue to Emphasize Assistance with Compliance in 2014 as Opposed to Enforcement
DOL stated that: “ The Departments’ basic approach to ACA implementation is: “[to work] together with employers, issuers, States, providers and other stakeholders to help them come into compliance with the new law and [to work] with families and individuals to help them understand the new law and benefit from it, as intended. Compliance assistance is a high priority for the Departments. Our approach to implementation is, and will continue to be, marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law.”
3. Disappointment: No Further Mention on How to Make a SBC for a HRA or FSA
The FAQ was silent on how to draft a SBC for a HRA or FSA. Until further guidance is provided, plan sponsors should use a good faith effort to satisfy the core SBC principles of transparency and simplicity. In regards to the attestation that a FSA or HRA provides “essential health benefits” or “minimum value”, it is recommended that the SBC communicate that, by itself, the FSA or HRA does not satisfy the “essential health benefits” or minimum value” but that these requirements are satisfied in coordination with the major medical plan of which the FSA or HRA is a component piece.
Copies of the FAQs and 2014 Templates
- A copy of the recently released set of SBC FAQs can be found here: Part XIV
- Click on the following links to download copies of the updated SBC templates for use on or after January 1, 2014: cciio.cms.gov and http://www.dol.gov/ebsa/healthreform/index.html.
Seminar: New Challenges in Health Care and FMLA
February 14, 2013 at 12:30 pm | Posted in Federal Laws, Flexible Spending Accounts, FMLA, Health Care, Regulations, Seminar | Leave a commentTags: constitutional, FMLA, health insurance, Seminar
This seminar has been HRCI CE Certified for 1 credit.
New Challenges in Health Care and FMLA
Wednesday, March 20, 2013
Program: 8:30a.m.–12:00p.m.
1657 Worcester Road, Framingham, MA 01701
Telephone: 508-879-7200
- Alden J. Bianchi, Esq., Mintz Levin
- Ellen McCann, Esq., AVP, Senior Counsel, Unum
- George M. Thompson, Esq., The Protector Group Insurance Agency
New Federal Employee Benefit Requirements for the rest of 2012 and 2013
August 20, 2012 at 10:34 am | Posted in Affordable Care Act, Flexible Spending Accounts, PPACA | Leave a commentTags: "PPACA", 2010 Patient Protection Affordable Care Act, ACA, constitutional, FSA, Summary of Benefits and Coverage (SBC), Supreme Court, W-2
Now that the Supreme Court has ruled that the Patient Protection Affordable Care Act (PPACA) passes constitutional scrutiny, the following is an outline of new PPACA requirements for the remainder of 2012 and 2013, several of which are still in need of further regulatory guidance. The major requirements such as the “pay or play” mandates and penalties for employers and individuals, nondiscrimination testing for fully insured plans, and automatic enrollment are deferred until 2014.
Remainder of 2012
September 23, 2012 – Summaries of Benefits & Coverage (SBC)
For plan years commencing on and after Sept. 23, 2012, self insured group health plans and group health plan insurers must provide SBCs in connection with annual enrollment and for new enrollees.
December 31, 2012 – Form W-2 Reporting for 2012 Tax Year
Form W-2s must include the value of group health plan benefits provided to employees.
This applies to employers issuing 250 or more Form W-2s in 2012. Deadline for issuance of 2012 Form W-2s is Jan. 31, 2013. This requirement is informational only and does not mean that employer-provided coverage will be subject to income tax.
2013
January 1, 2013 – Flexible Spending Account (FSA) Annual Limit
Maximum dollar limit for an employer’s FSA plan is $2,500 annually for plan years starting on or after January 1, 2013.
March 1, 2013 – Employee Notice of Exchange
Employers must provide a notice to employees of availability of State Health Insurance Exchanges.
July 2013 – Payment of Comparative Clinical Effectiveness Research Fees
For plan years ending on and after Oct. 1, 2012, self-insured group health plans and insurers must pay fees per covered life. The current, initial fee is $1 per covered life, increasing to $2 per covered life for plan years ending on and after Oct. 1, 2013 (and adjusted for later plan years). The first possible payments are due July 1 or July 31, 2013, depending on method of calculation.
December 31, 2013 – Form W-2 Reporting for 2013 Tax Year
Form W-2s must include the value of group health plan benefits provided to employees.
This applies to employers issuing less than 250 Form W-2s in 2013. Deadline for issuance of 2013 Form W-2s is Jan. 31, 2014. This requirement is informational only and does not mean that employer-provided coverage will be subject to income tax.
IRS Proposes New Excise Tax on Fully Insured and Self Insured Health Plans
June 22, 2012 at 3:04 pm | Posted in Flexible Spending Accounts, Health Care, Health Reimbursement Account, Medical, PPACA, Regulations | Leave a commentTags: "PPACA", 2010 Patient Protection Affordable Care Act, FSA, health insurance, HRA, IRS, tax
The Internal Revenue Service (IRS) has recently proposed regulations concerning the imposition of a new excise tax on fully insured and self insured health plans. The proposed regulations are not final and are subject to change based on pubic comments and a public hearing scheduled in August 2012.
What is the proposed excise tax for?
The excise tax is a product of the Patient Protection Affordable Care Act (PPACA) that is currently being reviewed by the U.S. Supreme Court. The purpose of the tax is to fund an operational account trust fund for a new federally created non-profit corporation called the “Patient Centered Outcomes Research Institute.” The Institute will assist public policy makers in making informed health decisions by advancing the quality and relevance of evidence based medicine.
Who pays the proposed excise tax?
If you have a fully insured health plan, your health insurer will pay the excise tax. If you have a self insured health plan, the plan sponsor will pay the excise tax. The proposed regulation considers both a FSA and a HRA to be “self insured plans” and the plan sponsor of either will be responsible for paying an excise tax if either the FSA or the HRA is integrated with a fully insured health plan. If the FSA or HRA is integrated with a self insured health plan offered by the same plan sponsor, however, the proposed regulation excuses an excise tax on either the FSA or HRA component.
How much is the proposed excise tax?
The proposed regulation generally provides that a per covered life fee will be imposed. The fee is only one step in a two-step process to determine an excise tax. Specifically, the fee will be $1 per covered life for plan years ending on or after October 1, 2012 and before October 1, 2013. The fee then doubles to $2 per covered life for plan years ending after October 1, 2013 and before October 1, 2014. Thereafter, the fee is increased annually based on “increases in the projected per capita amount of National Health Expenditures.
The second step in determining the excise tax is to select a covered lives counting option from a menu of different counting options depending upon whether the health plan is fully insured or self insured. As stated earlier, if you have a fully insured health plan, your health insurer will be responsible for paying the excise tax which will take into account the applicable fee ($1 or $2) and determining the number of covered lives. If you are the plan sponsor of a self insured health plan, FSA, or HRA you will have responsibility for determining the excise tax.
How do you determine the number of covered lives to count under a FSA or HRA?
The plan sponsor may treat each participants FSA or HRA as covering only a single life (no need to count dependents!) that do not participate in another self insured plan. The plan sponsor may use “any reasonable method to determine the average number of lives covered under the plan for the plan year.” The proposed regulation’s reference to “any reasonable method” is not limited to only the menu of other self insured plan counting methods explained below. Remember, the excise tax on a FSA or HRA is only applicable if the FSA or HRA is integrated with a fully insured health plan. The excise tax will not apply if the FSA or HRA is integrated with another self insured health plan.
How do you determine the number of covered lives to count under a self insured health plan (Other than a FSA or HRA)?
The proposed regulation has 3 options for self insured plan sponsors to pick from in regards to how you calculate the applicable number of lives to multiply by the earlier required $1.00 fee. The options are: (1.) the actual count method; (2.) the snapshot method; and (3.) the 5500 method. The option/method chosen must be used for the entire year. Some of the examples in the proposed regulation are helpful in understanding the three options available.
1. The Actual Count Method
Add the total number of lives for each day of the policy year and divide that total by the number of days in the policy year.
Example – Employer A is the plan sponsor of the Employer A Self-Insured Health Plan, which has a calendar year plan year. Employer A calculates the sum of covered lives under the plan for each day of the plan year ending December 31, 2013 as 3,285,000. The average number of covered lives under the plan for the plan year ending December 31, 2013 is 3,285,000 divided by 365, or 9,000. To calculate the fee for the plan for the plan year ending December 31, 2013, Employer A must determine the applicable dollar amount and multiply that amount by the average number of lives covered under the plan.
2. The Snapshot Method
There are a few variations in the proposed regulation of the general “Snapshot Method” that will follow. Determine the average number of lives covered under a policy for a policy year by adding the totals of lives covered on one date in each quarter of the policy year and dividing that total by the number of dates for each quarter. The dates for each quarter must be the same. For example, the first day of a quarter, the last day of a quarter.
Example – Employer B is the plan sponsor of the Employer B Self-Insured Health Plan, which has a calendar year plan year. Employer B has designated the first day of each quarter of the plan year as the date that Employer B counts the covered lives under the Employer B Self-Insured Health Plan. On January 1, 2013, Employer B Self- Insured Health Plan covers 2,000 lives, on April 1, 2013, 2,100 lives, on July 1, 2013, 2,050 lives, and on October 1, 2013, 2,050 lives. Under the snapshot count method, Employer B must determine the average number of covered lives under the Employer B Self-Insured Health Plan for the plan year ending December 31, 2013 as 8,200 (2,000 + 2,100 + 2,050 + 2,050) divided by 4, or 2,050. To calculate the fee for the plan year ending December 31, 2013, Employer B must determine the applicable dollar amount ($1 or $2) and multiply that amount by the average number of lives covered under the plan.
3. The 5500 Method
Use the number of reportable participants for the Form 5500 Annual Return/Report of the Employee Benefit Plan that is filed for the applicable self insured health plan for that plan year. The average number of lives covered under a plan year for a plan offering only “self only” coverage equals the sum of total participants covered at the beginning and the end of the plan year as reported on the form 5500 divided by two.
Example – Employer C is the plan sponsor of the Employer C Self-Insured Health Plan, which has a fiscal year plan year ending on July 31, 2013 and offers only “self only” coverage. Employer C files a Form 5500 for the Employer C Self-Insured Health Plan for the plan year ending July 31, 2013 reflecting 4,000 plan participants on the first day of the plan year and 4,200 plan participants on the last day of the plan year. For purposes of calculating the fee using the Form 5500 method, Employer C must treat the number of covered lives for the plan year ending July 31, 2013 as equal to the sum of 4,000 and 4,200 or 8,200, divided by 2, or 4,100. To calculate the fee for the plan year ending July 31, 2013, Employer C must determine the applicable dollar amount ($1 or $2) and multiply that amount by the average number of lives covered under the plan.
How will the excise tax be paid?
Although the proposed excise tax has not reached the point of a “final regulation”, plan sponsors of either self insured health plans, a FSA or a HRA should appreciate that they could be responsible for paying the excise tax. The proposed regulation identifies IRS Form 720, Quarterly Federal Excise Tax Return, as the proper vehicle to identify and pay the excise tax and that “the first potential due date for filing Form 720 is July 31, 2013.”
A copy of the proposed regulation can be found here: REG-136008-11.
IRS Issues Guidance on Flexible Spending Arrangements for Plan Years Starting After December 31, 2012
June 5, 2012 at 2:34 pm | Posted in Cafeteria Plans, Flexible Spending Accounts, PPACA | Leave a commentTags: "PPACA", Cafeteria Plan, FSA, IRS
This week the Internal Revenue service (“IRS”) issued guidance on Flexible Spending Arrangements (“FSA”) regarding, among other things, when to implement the $2,500 FSA cap legislated under the Patient Protection Affordable Care Act (“PPACA”). The guidance was necessary because of confusion over the FSA reference in PPACA which implemented the $2,500 cap for a “taxable year” which, of course, does not always align with a plan year.
The IRS advised that:
*The $2,500 limit on health FSA salary reduction contributions in a cafeteria plan applies on a plan year basis and is effective for plan years beginning after December 31, 2012.
- If a cafeteria plan has a short plan year (that is, fewer than 12 months) that begins after 2012, the $2,500 limit must be prorated based on the number of months in that short plan year.
- The $2,500 limit applies on an employee by employee basis. Thus two employees who are married can each elect to make salary contributions up to $2,500 each.
- The $2,500 limit is exclusive of any non-elective flex credit contributions an employer may wish to make to an employee’s health FSA. Accordingly, an employee’s $2,500 health FSA salary contribution limit can be supplemented by, for example, a $1,000 non-elective flex credit to the FSA extended by the employer.
- The $2,500 limit does not apply to FSA dependent care or adoption care contributions, health savings accounts, or health reimbursement arrangements.
- If a plan provides for a grace period (which can be no longer than two months and 15 days) for a plan year, unused salary reductions contributions to the health FSA for the plan year that are carried over into the grace period do not count against the $2,500 limit applicable to the subsequent plan year. The employee may use amounts remaining from the previous plan year to pay for expenses incurred for certain qualified expenses during the grace period.
- Finally, the IRS invited comments by August 17th on modifying or abolishing the health FSA “use it or lose” rule.
A copy of the complete IRS announcement is here: http://www.irs.gov/pub/irs-drop/n-12-40.pdf
IRS Issues Additional Guidance on what Health Insurance Benefits to Value for W-2 Reporting Requirements
June 4, 2012 at 4:39 pm | Posted in Dental, Flexible Spending Accounts, Health Care, Health Reimbursement Account, Health Saving Account, Medical | Leave a commentTags: FSA, health insurance, HRA, HSA, W-2
In an earlier Protector Group Alert, we advised you of the new W-2 health insurance benefit reporting requirements for large employers (more than 250 employees) which will have to be captured on 2012 W-2s. The reporting requirement will be extended to small employers (less than 250 employees) for 2013.
The IRS recently issued additional guidance on the new requirement, including the chart below which will assist employers in determining what and what not to value for W-2 health insurance reporting requirements.
|
Form W-2 Reporting of Employer-Sponsored Health Coverage |
|||
|
Coverage Type |
Form W-2, Box 12, Code DD |
||
|
Report |
Do Not Report |
Optional |
|
| Major medical |
X |
|
|
| Dental or vision plan not integrated into another medical or health plan |
|
|
X |
| Dental or vision plan which gives the choice of declining or electing and paying an additional premium |
|
|
X |
| Health Flexible Spending Arrangement (FSA) funded solely by salary-reduction amounts |
|
X |
|
| Health FSA value for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits |
X |
|
|
| Health Reimbursement Arrangement (HRA) contributions |
|
|
X |
| Health Savings Arrangement (HSA) contributions (employer or employee) |
|
X |
|
| Archer Medical Savings Account (Archer MSA) contributions (employer or employee) |
|
X |
|
| Hospital indemnity or specified illness (insured or self-funded), paid on after-tax basis |
|
X |
|
| Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer |
X |
|
|
| 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 |
| 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 |
| Wellness programs providing applicable employer-sponsored healthcare coverage |
Required if employer charges a COBRA premium |
|
Optional if employer does not charge a COBRA premium |
| Multi-employer plans |
|
|
X |
| Domestic partner coverage included in gross income |
X |
|
|
| Governmental plans providing coverage primarily for members of the military and their families |
|
X |
|
| Federally recognized Indian tribal government plans and plans of tribally charted corporations wholly owned by a federally recognized Indian tribal government |
|
X |
|
| Self-funded plans not subject to Federal COBRA |
|
|
X |
| Accident or disability income |
|
X |
|
| Long-term care |
|
X |
|
| Liability insurance |
|
X |
|
| Supplemental liability insurance |
|
X |
|
| Workers’ compensation |
|
X |
|
| Automobile medical payment insurance |
|
X |
|
| Credit-only insurance |
|
X |
|
| Excess reimbursement to highly compensated individual, included in gross income |
|
X |
|
| Payment/reimbursement of health insurance premiums for 2% shareholder-employee, included in gross income |
|
X |
|
|
Other Situations |
Report |
Do Not Report |
Optional |
| 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 |
| 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 |
| Forms W-2 provided by third-party sick-pay provider to employees of other employers |
|
|
X |
A copy of the entire IRS guidance can be found at:
IRS Issues New Guidance on Reporting Health Insurance Aggregate Cost on 2012 W-2s For Large Employers
January 23, 2012 at 2:08 pm | Posted in Flexible Spending Accounts, Health Care | Leave a commentTags: aggregate reportable cost, FSA, health insurance, IRS, Notice 2012-9, W-2
In December 2011 the IRS issued new “interim guidance” for employers concerning the new health insurance “aggregate cost” reporting regulation on the W-2s issued to employees. The regulation was part of the national health care legislation signed into law by President Obama in March 2010.
The new W-2 reporting requirement is effective this year for “large” employers who issue 250 or more W-2s. The requirement provides a “look back” trigger: the 2012 W-2 reporting responsibility is required if they issued 250 or more W-2s in the preceding calendar year (2011). In 2013 the regulation will apply to small employers, i.e. those who issue less than 250 W-2s.
The IRS reiterated that the reporting of the aggregate cost of health insurance on a W-2 does not make the aggregate cost of health insurance taxable. The purpose of the regulation is to provide useful and comparable consumer information to employees on the cost of their health care coverage.
General Guidance
1. A “large” employer must comply with the 2012 W-2 health care reporting requirement if the same employer issued more than 250 W-2s during the preceding calendar year. For example, if an employer issued more than 250 W-2s in 2011, the employer must comply with the regulation. Conversely, if an employer issued fewer than 250 W-2s for calendar year 2011, it does not have to comply with the requirement.
2. The aggregate cost of applicable employer sponsored coverage is the total cost of coverage under all applicable employer sponsored coverage provided to the employee.
3. The aggregate reportable cost of health care includes (a.) the portion of the cost paid by the employer and (b.) the portion paid by the employee, regardless of whether the employee paid for that cost through pre-tax or after-tax contributions. The aggregate cost will be reported in Box 12 of the W-2.
4. The aggregate reportable cost of health care includes the cost of coverage under the employee health plan of the employee and any person covered by the plan because of a relationship of the employee, including any portion of the cost that is includable in an employee’s gross income. Example. An employee has family coverage for himself, his spouse and dependents and an adult child age 28 with a cost of coverage for all of $15,000. The fair market value of the health coverage for the adult child age 28 is included in the income and wages of the employee. It is also a portion of the cost of coverage to be reported in Box 12 of the W-2.
5. The aggregate cost of health insurance and reporting requirement does not include coverage under a separate policy, which is substantially for treatment of the mouth, eye, long-term care, coverage for specific diseases (i.e. cancer coverage), or a hospital indemnity or other fixed indemnity insurance.
6. The aggregate cost of health insurance and reporting requirement does not apply to an ARCHER MSA, a health reimbursement account, or a health savings account.
7. The aggregate cost of health insurance and reporting requirement does not generally apply to any amount of salary reduction contributions to a health flexible spending arrangement (“FSA”) funded solely through salary reductions. However, employer flex credit dollars allocated by an employer to an FSA may have to be reported in certain instances. Examples are provided in Notice 2012-9.
8. For Terminated Employees: An employer may use “any reasonable method of reporting the cost of coverage provided under a group health plan” for an employee who terminated employment during the calendar year. An employer is excused from this requirement if the terminated employee requests a W-2 before the end of the calendar year.
A copy of the complete IRS Announcement can be found here: Notice 2012-9
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