W2 Reporting Requirements Under Health Care Reform


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Throughout this presentation from CBG Benefits, we provide an overview of some of they key W-2 Reporting Requirements that are associated to Health Care Reform.

This includes:
- Which employers are impacted
- What type of information must be reported
- Rules regarding terminated employees
- And more

We hope that you find this content helpful as you look for ways to ensure that you rem

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  • The Health Care Reform law that was enacted in 2010 contains a new reporting requirement for employers. Under the new rule, certain employers will be required to report the total cost of health plan coverage they provide on their employees’ W-2 Forms.
  • The new W-2 reporting requirement is just that. It is a reporting requirement only. The purpose of providing this information is to provide useful and comparable information to employees on the cost of their health care coverage. Including the value of the health coverage on the W-2 Form does not make the cost of the coverage taxable to the employee and the value of the coverage is not included as income for the employee.
  • There have been several changes to the compliance dates for the reporting rule. The IRS made reporting optional for all employers for the 2011 tax year. Reporting has also been delayed until at least the 2013 tax year for small employers that filed fewer than 250 W-2 forms in the prior year. Reporting is mandatory for large employers for the 2012 tax year, which means the information will need be reported on the W-2s that are issued in January 2013.
  • The next question for employers is: what information must be reported? Employers must report the total cost of certain types of employer-sponsored health coverage. In general, this means coverage under group health plans, including both insured and self-funded plans. It does not matter whether the employer or the employee pays for the coverage—it is the total cost of the coverage that must be reported. This means both the employer- and employee-paid portions. This information must be reported in box 12 of the W-2 Form with code “DD.”
  • Which employers must comply with the new W-2 reporting requirement? The answer to this question is most employers. Unless an exception applies, if the employer provides applicable health coverage to its employees, it will need to report the cost information on the W-2 forms. Along with private employers, the rule specifically applies to government entities, churches and religious organizations. However, some exceptions do exist – including Indian Tribal Owned Corporations and small employers, for now
  • The value of some types of coverage does not need to be and should not be reported on the W-2 Form. These are: long term care coverage; HIPAA excepted benefits such as accident or disability income, liability insurance and workers compensation; contributions to HSAs and Archer MSAs, employee salary reduction contributions to health FSAs, and benefits provided to military personnel and their families by government employers.
  • Employers may choose to report certain types of coverage. These are: coverage under a multiemployer plan; contributions to an HRA; separate dental and vision plans; self-insured plans of employers that are not subject to COBRA (such as church plans) and employee assistance plans, wellness programs an on-site medical clinics, but only if no COBRA premiums are charged for those benefits.
  • To determine the cost of coverage, make sure you include both the employer- and employee-portions of the cost. An employer may calculate the reportable cost under a plan using one of three methods: the COBRA applicable premium method, the premium charged method or the modified COBRA premium method. An employer is not required to use the same method for every plan, but must use the same method for all employees covered under each separate plan.
  • Under the COBRA applicable premium method, the cost of coverage for a tax year is the same as the COBRA applicable premium for that period. This does not include the two percent administrative fee that is allowed to be charged for COBRA.
  • For insured plans, the employer may use the premium charged method. Under this method, the cost of the coverage is equal to the entire premium charged by the insurer. The employer must use the premium amount charged for each employee’s coverage (for example, for self-only coverage or for family coverage, as applicable to the employee).
  • The health care reform reporting rule does not require employers to issue W-2s if a W-2 was not required before. For example, employers do not have to issue W-2 forms to retirees or employees without reportable compensation. Health care reform does not change this rule.
  • For reporting coverage of employees who have been terminated from employment during the year, employers may use any reasonable method to report the cost of their coverage.However, the IRS has indicated that the method used must be consistent for all terminated employees. Also, there is an exception to the reporting rule for terminated employees who request their W-2s before the end of the year. The cost of health coverage does not have to be reported on those W-2 Forms.
  • In order to comply with the Form W-2 reporting requirements, employers should take several steps. First, count the number of W-2 forms required to be filed to determine if you qualify for the temporary small employer exemption. If not, determine whether you sponsor plans providing the type of coverage that must be reported. Then, determine the cost for that coverage using one of the three methods we discussed. Make sure to address any special issues, such as composite rates or employees that terminated mid-year. If you work with a payroll provider, coordinate with them to make sure the appropriate information is collected and reported on the W-2 form.
  • W2 Reporting Requirements Under Health Care Reform

    1. 1. CBG Benefits Presents: W-2 Reporting Requirements Under Health Care Reform CBG BENEFITS: EMPLOYEE BENEFITS AND HR SOLUTIONSFor more information, please contact our team:• Web: http://CBGBenefits.com• Phone: 877-EE-Bnfts• Email: sales@CBGBenefits.com
    2. 2. What’s Changed? The laws within Health Care Reform present a new reporting requirement for employers. CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    3. 3. Tax Rules Stay the Same• Requirement impacts reporting only• Provides employee with information about cost of coverage CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    4. 4. Compliance Dates • Reporting delayed until 2013 for small employers (or until further guidance is issued) • Reporting is mandatory in 2012 for large employers (W-2 forms will be provided in Jan. 2013) CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    5. 5. Information to Report• Total cost of employer-sponsored health coverage• Group health plan coverage• Total cost = employer portion + employee portion• Report in box 12 with code “DD” CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    6. 6. Most Employers Must Comply• Employers that provide applicable health coverage• Includes: • Government entities • Churches • Religious organizations• Some exceptions exist CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    7. 7. Coverage Exceptions • Long-term care • Health FSA salary • HIPAA Excepted benefits reductions • HSA/Archer MSA • After-tax coverage contributions • Military benefits CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    8. 8. Optional Coverage: What Employers May Report• Multiemployer plan coverage• Health Reimbursement Arrangements (HRAs)• Separate dental and vision plans not in another plan• Self-insured plans of employers not subject to COBRA• EAPs, wellness program or on-site medical clinic if no COBRA premiums CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    9. 9. Determining Cost of Coverage• Include employer & employee portion• Calculation methods: • COBRA applicable premium method • Premium charged method • Modified COBRA premium method CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    10. 10. COBRA Applicable Premium Method• Cost of coverage = COBRA applicable premium• Does not include 2 percent administrative fee CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    11. 11. Premium Charged Method • Can use for insured plans • Cost of coverage = premium charged by insurer • Use premium for each employee’s coverage CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    12. 12. W-2 Not Required? • New rule does not create new obligations to issue W-2 form • Employers do not have to issue a W-2 if it wasn’t otherwise required. CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    13. 13. Terminated Employees• Use reasonable, consistent method to report coverage• Exception for terminated employees who request W-2s before the end of the year CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    14. 14. Compliance Steps • Assess obligation to report • Determine the aggregate cost of each type of coverage • Coordinate with payroll provider to report coverage on Form W-2 CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    15. 15. Image CreditsQuestion Mark: http://www.flickr.com/photos/49968232@N00/12364944/Calendar: http://www.flickr.com/photos/78199439@N00/5144905694/Siding: http://www.flickr.com/photos/8531344@N06/2369962508/Taxes: Image courtesy of Arvind Balardman / FreeDigitalPhotos.netItemized Deductions: http://zywave.comCash and Stethoscope: http://zywave.com CBG Benefits | Copyright 2012 | http://CBGBenefits.com
    16. 16. THANK YOU!CONTACT CBG BENEFITS IFYOU HAVE ANY QUESTIONS.Web: http://CBGBenefits.com | Phone: 877-EE-BnftsEmail: sales@CBGBenefits.com | Twitter: @CBGBenefits