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IS YOUR PAYROLL
"READY TO ROLL" IN 2012?
Two Significant Changes Currently Affecting an
Employer's Payroll Obligations:
1. Form W-2 Reporting Requirements for Group Health Plans.
2. Employer-Provided Mass Transit Benefits.
Please Email or Call Us at 973.564.9100
Should You Need Any Assistance Regarding the Following New Requirements.
 1. IRS Issues Updates and Amendments to its Interim Guidance Regarding W-2 Reporting For Group Health Plans
The Affordable Care Act provides that for tax years beginning after December 31, 2010, employers will be required to report the value of employer-provided health coverage on Forms W-2. Understanding that employers needed time to adjust their payroll systems and establish adequate procedures, the IRS previously deferred this requirement until tax years beginning in 2012. CLICK HERE for more information on the prior deferments.
Earlier this month, the IRS issued Notice 2012-9, containing clarifications and amendments to its previously issued interim guidance regarding this requirement. Outlined below is a summary of some key items from Notice 2012-9, as well as suggested action steps for employers.
Which Employers are Subject to this Reporting Requirement?
- Notice 2012-9 reiterates that designated "small employers," remain exempt from this reporting requirement until further notice. A small employer is an entity required to file fewer than 250 Forms W-2 in a calendar year. The notice makes clear that this threshold is calculated at the employer-entity level, i.e. use of an agent for payroll administration is irrelevant for this purpose.
- If an employer is required to file 250 or more Forms W-2 in a calendar year, the obligation to report the cost of coverage will only arise if the employer provides group health coverage under either an insured or self-insured plan.
- Determining when an arrangement is a group health plan and whether the cost of coverage is reportable is a complex task. Generally an employer does not need to report the cost of coverage for certain arrangements, including but not limited to, long-term care, disability, certain dental and vision plans, Health Reimbursement Accounts, Health Savings Account, most Health Flexible Spending Accounts, and certain employee assistance programs ("EAPs), wellness programs and on-site medical clinics.
What Amounts Are Reportable? - It is now clear that the reportable amount includes both the employer and employee contributions to the cost of coverage, regardless of whether the employee pays his or her share with pre-tax dollars.
- Additionally the amount reportable should include costs that may be taxable to the employee, such as the cost of covering a domestic partner or same-sex spouse.
- The actual amount reportable can be determined under several methods with insured arrangements having the option of referring to the actual premium charged by the carrier for the employee's particular coverage, for example, self-only or family.
How is the Cost of Coverage Reported? - The cost of coverage is reported in box 12 of the Form W-2 using code DD.
What Should Employers Do Now? - Although the 2012 Forms W-2 will generally not be issued until January 2013, employers should determine if they are currently subject to this reporting requirement and identify those plans for which the cost is reportable. Nukk-Freeman & Cerra is available to assist you with this determination and to help you establish your own procedures for compliance.
2. Increased Rate for Public Transportation Commuter Tax Benefit Not Extended By Congress As of January 1, 2012 the monthly tax exclusion for the employer-provided commuter mass transit benefit has been decreased from $230 per month to the original $125 per month. The American Recovery and Reinvestment Act (ARRA) increased the benefit to $230 effective March of 2009 with an expiration date of December 2010. One of the effects of the increase was to make the benefit equal to its employer-provided parking counterpart. The benefit was extended through 2011 under the Tax Relief and Job Creation Act of 2010. Upon its expiration on December 31, 2011, Congress failed to extend this increase which has the effect of increasing the employee's taxable income by any amount above $125 that he or she pays for commuting. While there is hope Congress will correct this disparity soon, employers should immediately notify their employees of this change and adjust payroll records and practices accordingly. Note that qualified parking benefits remain excludable from income up to the 2012 -adjusted $240 per month. NFC is available to discuss the impact of this change on your business. Should You Need Any Assistance Complying with These New Requirements, The Affordable Care Act or Any Other Employee Benefits Matters, Contact: Liza Hecht (lhecht@nfclegal.com) or Christine Gottesman (cgottesman@nfclegal.com) or The Nukk-Freeman & Cerra attorney with whom you work. Any tax advice included in this written or electronic communication was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed on the taxpayer by any governmental taxing authority or agency. | 
