W-2 Health Insurance Reporting Review
It's that time of year again, and large employers need to remember to include the cost of health insurance in employee W-2s. The ACA requires employers to report the "aggregate cost" of certain types of employer provided health coverage on an employee's W-2. The reporting requirement does not affect the tax status of the benefits, but was designed to assist in collecting the data necessary to administer various provisions of the ACA. The reporting requirement has been delayed by the IRS for small employers.
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Requirement Delayed for Small EmployersThe IRS has provided transition relief for small employers. The reporting requirement has been delayed for employers who filed fewer than 250 W-2s in the previous tax year. IRS Notice 2012-9 states that "until further guidance is issued, an employer is not subject to the reporting requirement for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year." For purposes of applying this transition relief, the W-2 count is determined without application of any entity aggregation rules for related employers. Consequently, related employers who may be considered under common control for other ACA purposes can be considered separately to determine whether they are subject to the W-2 reporting requirement. What Must Be Reported?The "applicable cost" of coverage is the entire plan cost, including both the employer and employee contributions. Self-funded plans are generally allowed to utilize the method used to determine applicable COBRA rates to calculate the aggregate cost of a plan. Applicable cost must be calculated on a monthly basis based on the specific coverage (e.g. single or family) maintained by the employee. "Applicable employer-sponsored coverage" includes coverage under any group health plan made available to employees which is excludable from the employee's gross income under §106. However, certain benefits are specifically excluded from the reporting requirement. Benefits not required to be included in the W-2 reporting are:
- Health Reimbursement Arrangements (HRAs).
- Stand-alone dental or vision coverage that meets the HIPAA definition of an "excepted benefit."
- Coverage issued as a supplement to liability insurance.
- Workers' compensation or similar insurance.
- Long-term care insurance.
- Liability insurance, credit-only insurance and automobile medical payment insurance.
- Coverage only for a specified disease or illness, hospital indemnity or other fixed indemnity insurance provided that such coverage is not coordinated with the employer's other health plans.
Read Full Alert The McCart Group will continue to update you on the regulations as they are released.
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