This is a special guest post courtesy of our Payroll company Olde Florida Payroll. We’ve been using their services for years (thanks for saving us big dollars over PayChex!), but they always send these helpful email newsletter. With the launch of our new site we’ll be working together to bring you the best of their helpful information. As always if you have any questions or comments, feel free to add your two cents below!
The Internal Revenue Service (IRS) issued additional guidance for employers on reporting health care costs on an employee’s Form W-2. This new guidance (Notice 2012-9) changes some requirements and provides additional details that employers and payroll providers will need to understand as they prepare to meet the new informational reporting requirements.
Who cares? Does this apply to me?
Most readers of this newsletter work for small employers. If your business filed fewer than 250 W-2s last year, you’re exempt!
We’re a big company — what should I do?
Read through this summary, or consult the official IRS bulletin by CLICKING HERE.
Next, consult with your health benefits broker.
Your broker should be skilled at navigating clients through the myriad changes in U.S. healthcare law. You’re paying for that expert advice, so seek it!
Once you’ve obtained a solid understanding of what benefits need to be reported and how you’ll calculate them over the course of 2012, contact our firm. Olde Florida Payroll will design the perfect reporting mechanism to post these contributions on employee paystubs (if you wish) and appropriately on this year’s W-2.
Summary of IRS Bulletin
The Notice reiterates that this reporting is informational only and does not cause employer-provided health care to become taxable to the employee.
- Effective date. The requirements remain effective for 2012 Form W-2 reporting, which generally will be issued in January 2013, and reporting is not required on any forms furnished to employees prior to January 2013. Small employers (those filing fewer than 250 W-2s in 2011) are exempt from reporting until further guidance is issued, not merely for 2012 as previous guidance had indicated.
- Which employers must comply? The general rule remains that all employers that provide health coverage are subject to the reporting requirements, except Federally-recognized Indian tribal governments. The notice expands this exemption to cover employers that are tribally chartered corporations wholly owned by a tribal government, until further guidance is issued.
- Which employees are affected? All employees are still generally included in the reporting requirements, except individuals who would not otherwise receive a W-2 (i.e. retirees, COBRA participants).
- Coverage to be reported. The notice further clarifies and defines the types of coverage that must be included in the amount reported on Form W-2.
- Notably, EAPs, wellness plans, and on-site medical clinics only need to be reported if the plan is subject to COBRA (or other Federal continuation requirements) and the covered individual is charged a premium for the continuation coverage.
- Also excluded from the reporting requirements are vision and dental plans that are excepted benefits under HIPAA (generally with policies, elections and/or premiums that are separate from those of major medical coverage). Previous guidance used a somewhat different standard for excluding these benefits: whether the plan was “integrated into” a major medical plan. This new standard is more familiar and generally understood by the benefits community.
- The Notice emphasizes that an employer may include on Form W-2 the cost of coverage that is not required to be reported, such as coverage under a Health Reimbursement Arrangement (HRA), a multiemployer plan, an EAP, wellness program, or on-site medical clinic, provided such coverage constitutes applicable employer-sponsored coverage and the cost is properly calculated.
- The Notice clarifies that the reportable cost does not include excess reimbursements of highly compensated individuals that are included in income because a self-funded plan violates the nondiscrimination rules in Code Section 105(h) nor taxable coverage due to an employee being a 2% (or more) shareholder in an S corporation.
- Calculation of amounts to be reported. The Notice retains the availability of several calculation methods that may be used to determine the reportable cost of coverage. For insured plans, employers may report the amount of the premium charged by the employer; self-insured plans may use existing COBRA calculation methods.