On June 28th, the United States Supreme Court upheld arguably all of the substantive provisions of the Patient Protection and Affordable Care Act (PPACA). In addition to all those in the health care and insurance industries who were waiting to know the fate of this law, you can add another interested group: your accounting department.
Beyond rolling out new health insurance changes, the PPACA creates a series of new taxes and tax reporting requirements. This article will discuss the new “W-2” reporting requirements.
Initially, W-2s were to include the aggregate value of employer sponsored health coverage beginning in 2011 by reflecting this information on the W-2s issued on or before January 31, 2012. The W-2 reporting was one of the first requirements to be postponed after the law was passed. However, the day of reckoning is near as the last legal challenge before the Supreme Court has been resolved and the 2012 reporting requirements are fast approaching.
The first thing to note is the current guidelines are in the form of “transitional relief.” This means there will be more guidance and regulations to come, and that any future changes will be provided at least six (6) months before the calendar year in which they become effective. Therefore, we know what to expect for the year 2012 and who needs to augment their W-2s due January 31, 2013.
If your company issued 250 or more W-2s in 2011, you need to report the aggregate value of employer sponsored health coverage on your 2012 W-2s. Remember that you are counting W-2 forms, not employees at year end. Employers with high employee turnover may be surprised to find themselves over this threshold. If you are below this threshold, you currently have no reporting requirements, but stay tuned for future developments.
If you are required to prepare these augmented W-2s you can assure your employees that this amount is NOT taxable income to your employees in 2012. However, this information is scheduled to be used to impose an excise tax on employees who enjoy high end “Cadillac Health Plans” beginning in 2018. Also note, employers are not required to send a W-2 to a retiree or COBRA participant without wages or other W-2 amounts merely to provide this new health cost information.
For those required to report, you will need to calculate the value of health coverage under a group health plan made available by the employer. However, this amount does NOT include long term care policies, disability income policies, policies for dental or vision care that are subject to “separate premiums,” or specified disease coverage (such as a cancer policy) that is not excludable from gross income and does not provide for an after tax deduction. Also excluded are Employee Assistance Programs, Wellness Plans, and on-site clinics if the employer does not charge a premium for federal continuation coverage.
Other excluded items include Archer Medical Savings Accounts, Health Savings Accounts, and Health FSA Salary Reductions, all of which are subject to their own separate reporting requirements. However, if the employer matches the employee’s contributions to a Health FSA, then the employer match is included in the W-2 reported amount.
If you would like additional guidance on whether you are required to augment your W-2s in 2012, especially if you are a participant in a Multiemployer plan, or if you would like assistance in calculating your coverage costs to be reported, please contact us.
Please contact us at www.hwelaw.com if you have questions regarding this article or if we can be of assistance.