When the Patient Protection and Affordable Care Act was signed into law by President Obama in March 2010, one of the provisions that employers immediately recognized as potentially burdensome was the requirement that the cost of employer-sponsored group health plan coverage be included on an employee’s Form W-2.
While this requirement was originally scheduled to be effective for taxable years beginning on or after Jan, 1, 2011, the Internal Revenue Service granted a one year extension in late 2010 so that the requirement now applies beginning with the 2012 Forms W-2.
Two potentially significant issues that were immediately identified by employers under this new enhanced reporting requirement were how small employers and retiree health care plans would be impacted.
In Notice 2011-28, which was published by the IRS on March 29, 2011, guidance is now available with respect to both of these issues.
Small employer exception
While the general rule is that all employers that provide employer-sponsored group health plan coverage during a calendar year are subject to the enhanced Form W-2 reporting requirement, a limited exception now exists for small employers.
Specifically, in the case of the 2012 Form W-2 (which must be delivered to employees on or before Jan. 31, 2013), an employer is not subject to the enhanced reporting requirement for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year.
Consequently, if an employer files fewer than 250 2011 Forms W-2, the employer would not be subject to the enhanced reporting requirement for the 2012 Forms W-2.
This exception will be very helpful to those employers that do not reach the 250 Forms W-2 threshold. In addition, while the exception specifically applies with respect to the 2012 Form W-2, the exception is available until the issuance of further guidance. Therefore, it is possible that this exception will be extended into later taxable years. In any event, the earliest that such small employers would be required to comply is the 2013 Forms W-2 in January 2014. While the exception applies with respect to the 2012 Forms W-2, the determination of whether the 250 Form W-2 threshold has been reached is based on the prior year (i.e., 2011).
However, it is important that employers who may be eligible for this small employer exception in 2012 are aware of the exception throughout 2011.
Retiree health care plans
Upon passage of the PPACA, there was concern about whether the enhanced Form W-2 reporting requirement would be applied to retirees that receive medical coverage under an employer-sponsored retiree health care plan.
Notice 2011-28 confirms that a Form W-2 is not required in this scenario, as an employer is not required to issue a Form W-2 including the aggregate reportable cost to an individual to whom the employer is not otherwise required to issue a Form W-2.
Therefore, individuals such as retirees or other former employees receiving no compensation from the employer do not need to receive a Form W-2 based solely upon the newly enhanced reporting obligation related to employer-sponsored group health plans.
The guidance that the Form W-2 reporting requirement does not apply to retirees receiving health care coverage resolves a key outstanding issue under PPACA and will be greeted favorably by employers offering such coverage.
In addition, by not having to an issue a Form W-2 to these individuals, such individuals will not be counted with respect to the 250 Forms W-2 threshold for the small employer exception noted above.
Notice 2011-28 is very helpful in resolving two of the key questions that remained with respect to the enhanced Form W-2 reporting requirements related to employer-sponsored group health plans.
Employers should consult with their employee benefits counsel and tax advisors to determine the impact that this guidance will have on their reporting obligations.
Wednesday, June 8, 2011
Friday, May 27, 2011
Two health care reform provisions repealed
Congress acted recently to repeal two provisions of PPACA that had concerned many employers: the expanded 1099 reporting requirement and "free choice" vouchers.
The first provision would have mandated businesses to report annual payments exceeding $600 for gross proceeds and amounts in consideration for property on Form-1099 Misc. beginning in 2012. This expansion of 1099 reporting rules was unrelated to health care but was included in the legislation as an attempt to raise $17 billion over ten years toward the $1 trillion projected cost of health care reform.
Both the House and Senate made it a priority to remove the controversial 1099 provision from PPACA. President Obama agreed and signed the repeal into law on April 14, 2011.
As a result of the last-minute compromise to avoid a government shutdown, Congress eliminated another key PPACA provision.
The "free choice" voucher provision would have taken effect in 2014 and required employers in very limited circumstances to give employees a voucher equal to the value of the employer's contribution to health coverage premiums. Recipients would then have been able to use these vouchers to help pay premiums for coverage purchased from state Health Insurance Exchanges.
Labor unions and some employer groups were concerned that younger and healthier employees might prefer to buy lower-cost, voucher-subsidized insurance from the Exchanges, reducing the size of risk pools and driving up premiums for employer health plans.
The repeal of these two provisions demonstrates that Congress views health care reform as an ongoing process. No one knows what might go next - Stay tuned.
Congress acted recently to repeal two provisions of PPACA that had concerned many employers: the expanded 1099 reporting requirement and "free choice" vouchers.
The first provision would have mandated businesses to report annual payments exceeding $600 for gross proceeds and amounts in consideration for property on Form-1099 Misc. beginning in 2012. This expansion of 1099 reporting rules was unrelated to health care but was included in the legislation as an attempt to raise $17 billion over ten years toward the $1 trillion projected cost of health care reform.
Both the House and Senate made it a priority to remove the controversial 1099 provision from PPACA. President Obama agreed and signed the repeal into law on April 14, 2011.
As a result of the last-minute compromise to avoid a government shutdown, Congress eliminated another key PPACA provision.
The "free choice" voucher provision would have taken effect in 2014 and required employers in very limited circumstances to give employees a voucher equal to the value of the employer's contribution to health coverage premiums. Recipients would then have been able to use these vouchers to help pay premiums for coverage purchased from state Health Insurance Exchanges.
Labor unions and some employer groups were concerned that younger and healthier employees might prefer to buy lower-cost, voucher-subsidized insurance from the Exchanges, reducing the size of risk pools and driving up premiums for employer health plans.
The repeal of these two provisions demonstrates that Congress views health care reform as an ongoing process. No one knows what might go next - Stay tuned.
Thursday, May 26, 2011
New Health Savings Account (HSA) Limits Announced for 2012
The IRS has just released Revenue Procedure 2011-32 which provides information on the limits for HSA plans for 2012. The annual contribution limitation on deductions for individuals with self-only coverage under a high deductible health plan will be $3,100. The deduction limitation for an individual with family coverage will be $6,250. These both represent small increases over the limits for 2011.
In order for a plan to be considered a “High Deductible Health Plan” for 2012, the deductible for self-only coverage must be at least $1,200 and $2,400 for family coverage. These minimums have not changed from 2011. The maximum out of pocket expenses may not exceed $6,050 for self-only coverage and $12,100 for family coverage in 2012. dw
In order for a plan to be considered a “High Deductible Health Plan” for 2012, the deductible for self-only coverage must be at least $1,200 and $2,400 for family coverage. These minimums have not changed from 2011. The maximum out of pocket expenses may not exceed $6,050 for self-only coverage and $12,100 for family coverage in 2012. dw
Thursday, December 23, 2010
Thursday, October 21, 2010
Tuesday, July 27, 2010
Monday, April 19, 2010
COBRA Premium Reduction Extended AGAIN!
As anticipated, Congress has extended the COBRA premium reduction to individuals that have experienced an involuntary termination of employment at any point from September 1, 2008 through May 31, 2010 or if from March 2, 2010 through May 31, 2010 the involuntary termination followed a qualifying event that was a reduction in hours that occurred anytime from September 1, 2008 through May 31, 2010. “Assistance eligible individuals” pay only 35% of their COBRA premiums with the remaining 65% reimbursed to the coverage provider through a tax credit.
A new penalty provision was added to ARRA that provides for the appropriate Secretary to access a penalty against a plan sponsor or health insurance insurer of up to $110 per day for each failure to comply with such Secretary’s determination 10 days after the date of the plan sponsor’s or issuer’s receipt of the determination.
A new penalty provision was added to ARRA that provides for the appropriate Secretary to access a penalty against a plan sponsor or health insurance insurer of up to $110 per day for each failure to comply with such Secretary’s determination 10 days after the date of the plan sponsor’s or issuer’s receipt of the determination.
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