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What's New with Form W2?

You may have new reporting responsibilities in January 2013

Employers sponsoring group coverage will have new reporting responsibilities according to the Affordable Care Act (ACA) and the Internal Revenue Service (IRS). You may need to report costs associated with employer-sponsored health coverage on IRS Form W2.

 

What's new?
In January 2012, employers will need to report aggregated costs of employer-sponsored health coverage for 2012. The total amount paid by the employer and the portion paid by the employee in 2012 will need to be included in box 12, using code DD, on Form W2 in January 2013. The code DD indicates that this amount is not included as part of an employee's taxable income.

 

Who has to comply with this report?
If you offer employer-sponsored group coverage and issue 250 or more W2 Forms annually, you must comply with this new regulation.

Some employers are exempt from these reporting requirements1:

  1. Tribally chartered corporations wholly owned by Federally recognized Indian tribal governments (further guidance is expected to clarify this issue)
  2. Self-funded group health plans that are not subject to any federal continuation coverage requirements

You should always consult with your tax advisor to see if this rule applies to you.

 

What's the purpose of the W-2 reporting? 
It is informational only. It gives employers an opportunity to disclose how much value their employees receive in benefits. Of course, there are guidelines in what must be included (required), what can be included (optional) and what cannot be included (excluded).

 

The table below outlines the required, optional and excluded costs that employers may include. But before doing so, you should consult with your tax advisor.

 

Required Costs Optional Costs Excluded Costs2

Major Medical

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

Health Flexible Spending Account (FSA) funded solely by salary-reduction amounts

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

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

 

Health Savings Account (HSA) contributions (employer or employee)

Hospital Indemnity or specified illness paid through pre-tax salary reduction or by employer

Health Reimbursement Account (HRA) contributions

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

Domestic Partner Coverage included in gross income

Multi-employer plans

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

Employee Assistance Plan (EAP) providing applicable employer-sponsored health care coverage (ONLY if employer charges a COBRA premium)

Employee Assistance Plan (EAP) providing applicable employer-sponsored health care coverage (ONLY if employer DOES NOT charge a COBRA premium)

Government plans providing coverage primarily for members of the military and their families

Onsite medical clinics providing applicable employer-sponsored health care coverage (ONLY if employer charges a COBRA premium)

Onsite medical clinics providing applicable employer-sponsored health care coverage (ONLY if employer DOES NOT charge a COBRA premium)

Accident or disability income, long-term care, liability insurance, supplemental liability insurance, workers' compensation, automobile medical payment insurance, credit-only insurance

Wellness programs providing applicable employer-sponsored health care coverage (ONLY if employer charges a COBRA premium)

Wellness programs providing applicable employer-sponsored health care coverage (ONLY if employer DOES NOT charge a COBRA premium)

Excess reimbursement to highly compensated individuals, included in gross income

 

Self-funded plans not subject to Federal COBRA

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

2Federal tax laws do not recognize domestic partners or same-sex marriages. As a result, the value of benefits extended to domestic partners and same-sex spouses will be taxable under federal law unless the domestic partner or same-sex spouse otherwise qualifies as the employee's dependent under federal law.


There are a few situations where employers have the option to provide the required and optional information listed above to their employees:

  1. Employers required to file fewer than 250 Forms W2 from the preceding calendar year (determined without application of any entity aggregation rules for related employers)
  2. Forms W2 furnished  to employees who terminate before the end of a calendar year and request, in writing, a Form W2 before the end of that year
  3. Forms W2 provided by third-party, sick-pay provider to employees of other employers

This information is provided by the IRS' Information Reporting Program Advisory Committee (IRPAC). IRPAC's members are representatives of industries responsible for providing information returns, such as Form W2, to the IRS. IRPAC works with the IRS to improve the information reporting process.

 

We highly recommend that you consult with your tax advisor to learn more about how the Form W2 reporting affects you.

 

The above description about tax rules is general in nature. Please consult your tax advisor about how these rules impact you. This information is not intended to be used for purpose of avoiding penalties that may be imposed by federal or state taxing authorities.

1 Refer to IRS Notice 2011-28, question 21, and IRS Notice 2012-9

Source: PPACA Subtitle F, Part I, Sec. 1502: Amends IRS Code of 1986 by adding subpart D after subpart C in subchapter A of Chapter 61. Detailed in IRS Notice 2011-28

 

  Wellmark is not providing any legal advice with regard to compliance with the requirements of the Affordable Care Act (ACA) or the Mental Health Parity Addiction Equity Act (MHPAEA). Regulations and guidance on specific provisions of the ACA and MHPAEA have been and will continue to be provided by the U.S. Department of Health and Human Services (HHS) and/or other agencies. The information provided reflects Wellmark's understanding of the most current information and is subject to change without further notice. Please note that plan benefits, rates, renewal rate adjustments, and rating impact calculations are subject to change and may be revised during a plan's rating period based on guidance and regulations issued by HHS or other agencies. Wellmark makes no representation as to the impact of plan changes on a plan's grandfathered status or interpretation or implementation of any other provisions of ACA. Any questions about Wellmark's approach to the ACA of MHPAEA may be referred to your Wellmark account representative. Wellmark will not determine whether coverage is discriminatory or otherwise in violation of Internal Revenue Code Section 105(h). Wellmark also will not provide any testing for compliance with Internal Revenue Code Section 105(h). Wellmark will not be held liable for any penalties or other losses resulting from any employer offering coverage in violation of section 105(h). Wellmark will not determine whether any change in an Employer Administered Funding Arrangement affects a health plan's grandfathered health plan status under ACA or otherwise complies with ACA. Wellmark will not be held liable for any penalties or other losses resulting from any Employer Administered Funding Arrangement. For purposes of this paragraph, an "Employer Administered Funding Arrangement" is an arrangement administered by an employer in which the employer contributes toward the member's share of benefit costs (such as the member's deductible, coinsurance, or copayments) in the absence of which the member would be financially responsible. An Employer Administered Funding Arrangement does not include the employer's contribution to health insurance premiums or rates.

 


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