Form W-2 Reporting
The Affordable Care Act required informational reporting of the aggregate cost of employer sponsored group health plan coverage beginning with 2012 W-2s issued in January 2013 (ErisaALERT 2011-5 and ErisaALERT 2011-14). The IRS provides new guidance in Notice 2012-9 which restates and supersedes previous guidance. In this latest Notice, the IRS clarifies some of the Q’s and A’s in Notice 2011-28 and adds new Q’s and A’s. The changes are summarized in the introduction to the Notice. This ErisaALERT will provide the highlights of the new Notice.
The rules
Reporting does not apply to:
- dental and vision plans if they are not subject to HIPAA, i.e., if the dental and vision plans are stand alone, are elected separately from medical and require an additional premium.
- health care FSAs where the only contributions are employee salary reduction contributions. (see Q&A 19 for examples of calculating reportable cost where the employer provides flex credits to the FSA).
- the cost of coverage under an EAP, wellness program or on-site medical clinic in the reportable amount if the employer does not charge a premium with respect to that type of coverage provided under COBRA to a qualifying coverage.
- Employee after tax contributions toward hospital indemnity or other fixed indemnity insurance or the cost of coverage for a specified disease or illness where the employer merely provides the opportunity for the employee to purchase the coverage.
- W-2’s provided by a third party sick pay provider.
- The cost of coverage includible income under §105(h) or payments or reimbursements of health insurance premiums for a 2% shareholder-employee of an S corporation who is required to include the premium payments in gross income.
- Until further guidance is issued, employers that are tribally chartered corporations wholly-owned by a federally recognized Indian tribal government
Employee pre-tax contributions through a §125 plan as well as employer contributions toward hospital indemnity or other fixed indemnity insurance that is excludable under §106 must be reported.
Even though third party sick pay providers do not have to report aggregate reportable cost, a Form W-2 furnished by an employer must include the aggregate reportable cost regardless of whether that Form W-2 includes sick pay or whether a third party sick pay provider is furnishing a separate Form W-2 reporting sick pay.
Employers that file less than 250 W-2s for 2011 are exempt from the reporting requirement for 2012 and later years until further guidance is issued. The clarification provides that the requirement to file is based on the number of W-2s the employer would have filed without regard to whether or not it used an agent.
Employers may include the cost of coverage under programs not required to be included, such as the cost of coverage under an HRA, a multi-employer plan, an EAP, wellness plan or on-site medical clinic provided the coverage is applicable employer-sponsored coverage (i.e., coverage available under any group health plan made available to the employee by the employer which is excludable from the employee’s gross income under §106).
The logistics
Each employer providing employer sponsored coverage reports the cost of coverage it provides.
If an employee works for multiple employers which are related and one employer is the common paymaster, then the common paymaster would include the cost of coverage of all employers for which it is the common paymaster.If there is no common paymaster then the aggregate reportable cost may be reported by one employer or allocated among employers using any reasonable method.
The aggregate reportable cost may be based on the information available to the employer as of December 31. The employer is not required to revise the aggregate reportable cost if the employer is notified after December 31 of a change which would have a retroactive effect on the already calculate reportable cost.
The employer has three choices on how to calculate costs for a payroll period that includes December 31: include the cost of coverage as provided in the calendar year that includes December 31 or include the cost of coverage as provided in the subsequent calendar year or allocate the cost between the two years as long as the allocation method is applied consistently.
If an employer offers coverage that includes other benefits that are not considered applicable employer sponsored coverage, e.g., long term care, an employer may use any reasonable allocation method to determine the cost of the portion of the program providing applicable employer-sponsored coverage.
What should Plan Sponsors do now?
- Identify what you are reporting; determine how you are going to calculate the aggregate reportable cost; identify who is responsible for accumulating and reporting the information; develop reasonability checks to ensure the calculations are accurate.
- Document, document, document!
You may want to check our new blog periodically for quick updates on compliance issues.
Note: all links are active as of the date of issuance of this ErisaALERT.
Disclaimer: This material is for the sole purpose of providing general information and does not under any circumstances constitute legal advice and should not be used as a substitute for legal advice. You should seek the advice of counsel when applying the requirements to your plan. For more information on this ErisaALERT contact us by phone at 610-524-5351 and ask for Mary Andersen or 973-994-7539 and ask for Theresa Borzelli.
