News
IRS Issues Additional Guidance on W-2 Reporting
Posted in News · February 1st, 2012
HCR IRS Issues Additional Guidance on W2 Reporting 1-2012
The Patient Protection and Affordable Care Act (PPACA) requires employers to report the aggregate cost of employer-sponsored group health coverage on employees’ Forms W-2. The purpose of the reporting requirement is to inform employees about the cost of their health coverage. The reporting does not cause employees’ health coverage to become taxable to them.
This reporting requirement was initially set to take effect beginning with the 2011 tax year. However, in October 2010, the Internal Revenue Service (IRS) delayed the compliance date by making health coverage cost reporting optional for the 2011 tax year.
In April 2011, the IRS issued Notice 2011-28, which further delayed compliance with this requirement for small employers (those filing fewer than 250 Forms W-2) and provided interim technical guidance on the reporting requirement. On Jan. 3, 2012, the IRS issued Notice 2012-9, which replaced Notice 2011-28, and updated the interim technical guidance on the Form W-2 reporting requirement.
This Corporate One Benefits Agency, Inc. Legislative Brief summarizes the IRS’s interim guidance on the Form W-2 reporting requirement.
COMPLIANCE DEADLINES
The Form W-2 reporting requirement is optional for small employers with respect to the 2012 Forms W-2. Small employers will not be required to comply with the reporting requirement for years beyond 2012, unless and until the IRS issues further guidance. A small employer is one that filed fewer than 250 Forms W-2 for the preceding calendar year. Thus, if an employer filed less than 250 Forms W-2 for 2011, the employer is not subject to the W-2 reporting requirement for 2012.
Large employers (those that file 250 or more Forms W-2) must comply with the reporting requirement beginning in 2012 for the Forms W-2 that must be provided by the end of January 2013.
INTERIM GUIDANCE:
Notice 2012-9 contains interim guidance for employers that include health coverage cost information on the Forms W-2 for 2012 and later years. Employers that voluntarily decided to report the cost of coverage on 2011 Forms W-2 may also rely on the technical guidance provided in Notice 2012-9.
Written in question-and-answer (Q&A) format,HCR IRS Q & As on Form W2 Reporting 1-2012 guidance provides information on the following issues:
• Employers subject to the reporting requirement;
• Method of reporting on the Form W-2;
• Aggregate cost of employer-sponsored coverage;
• Cost of coverage required to be included in the aggregate reportable cost;
• Methods of calculating the cost of coverage; and IRS Issues Additional Guidance on W-2 Reporting
Notably, this guidance clarifies that the cost of coverage under certain plans is not required to be included on an employee’s Form W-2. These plans include multiemployer plans, health reimbursement arrangements (HRAs), dental or vision plans that are not integrated into a group health plan providing health care coverage, self-insured group health plans that are not subject to federal continuation coverage requirements (such as church plans), and government plans maintained primarily for members of the military or their families.
The guidance also provides that employers are not required to report the cost of coverage under an employee assistance program (EAP), wellness program or on-site medical clinic if the employer does not charge COBRA beneficiaries a premium for the coverage. To read the full interim guidance, see Notice 2012-9 at http://www.irs.gov/pub/irs-drop/n-12-09.pdf.
COMPLIANCE STEPS FOR EMPLOYERS
Employers subject to the reporting requirement for 2012 should make sure that they (or their payroll providers) are prepared to gather the necessary health coverage cost information in advance of having to complete the 2012 Forms W-2. In doing so, these employers should make sure they can identify the applicable employer-sponsored coverage that was provided to each employee and are prepared to calculate the aggregate cost of that coverage.
Employers may also have to address questions from employees regarding whether their health benefits are taxable under this new requirement. They can assure employees that the rule is a reporting requirement only, and does not mean they will incur additional tax obligations.
HHS Proposes an APPROACH
Posted in News · January 25th, 2012
Health Care Reform HHS Proposes Approach for Defining Essential Health Benefits, 1-2012
January, 2012
Beginning in 2014, the Patient Protection and Affordable Care Act (PPACA) requires non-grandfathered plans in the individual and small group markets to offer a comprehensive package of items and services, known as essential health benefits. This requirement applies to plans offered inside and outside of the state insurance exchanges (Exchanges), which are scheduled to become effective in 2014. However, self-insured group health plans, health insurance coverage offered in the large group market and grandfathered plans are not required to cover essential health benefits.
PPACA identified in broad terms 10 benefit categories that must be included as essential health benefits. PPACA also directed the Department of Health and Human Services (HHS) to more specifically define the items and services that comprise essential health benefits.
On Dec. 16, 2011, HHS released an informational bulletin (Bulletin) outlining its proposed approach for defining essential health benefits. It was expected that HHS’s guidance would detail the items and services that must be covered as essential health benefits. Instead, HHS’s approach defers to the individual states by giving them flexibility to select their own benchmarks for defining essential health benefits.
This Corporate One Benefits Agency, Inc. Legislative Brief provides an overview of HHS’s proposed approach for defining essential health benefits.
ESSENTIAL HEALTH BENEFITS
PPACA provides that essential health benefits must include items and services within at least the following 10 categories:
• Ambulatory patient services;
• Emergency services;
• Hospitalization;
• Maternity and newborn care;
• Mental health and substance use disorder benefits, including behavioral health treatment;
• Prescription drugs;
• Rehabilitative and habilitative services and devices;
• Laboratory services;
• Preventive and wellness services and chronic disease management; and
• Pediatric services, including oral and vision care.
As noted above, PPACA directs HHS to further define the scope of essential health benefits.
PROPOSED APPROACH
Defining Essential Health Benefits
In the Bulletin, HHS outlines a benchmark approach for defining essential health benefits. Under this approach, each state would select a benchmark insurance plan that reflects the scope of services offered by a typical employer plan in the state. States would choose from one of the following benchmark plans:
• One of the three largest small group plans in the state by enrollment;
• One of the three largest state employee health plans by enrollment;
• One of the three largest federal employee health plan options by enrollment; or
• The largest HMO plan offered in the state’s commercial market by enrollment.
If a state does not select a benchmark plan, the default benchmark would be the small group plan with the largest enrollment in the state.
The items and services included in the selected benchmark insurance plan would be the essential health benefits package.
However, if a state selects a benchmark plan that does not cover the 10 categories of care specified under PPACA, the state would have the option to examine other benchmark insurance plans, including the Federal Employee Health Benefits Plan, to determine the type of benefits that must be included in the essential health benefits package.
Making Benefit Design Decisions
HHS would require health plans to offer benefits that are “substantially equal” to the benchmark plan selected by the state, and modified if necessary to include PPACA’s 10 categories of coverage. According to HHS, health plans would have flexibility to adjust benefits, including both the specific services covered and any quantitative limits, so long as they offer coverage for all 10 categories and the coverage has the same value.
Coverage of State Benefit Mandates
States typically have a number of benefit mandates, which require health insurance issuers to provide coverage for certain items or services. To prevent federal funding of state benefit mandates, PPACA requires states to defray the costs of state-mandated benefits in excess of essential health benefits for individuals enrolled in any plan offered through an Exchange.
However, as a transition for 2014 and 2015, if a state chooses a benchmark subject to state mandates (for example, one of the three largest small group plans in the state), the benchmark would include those mandates in the state’s essential health benefits package. Alternatively, if a state selected a benchmark that did not include some or all of the state’s benefit mandates (for example, one of the three largest federal employee health plan options), the state would be required to cover the cost of those mandates outside of the state’s essential health benefits package.
HHS intends to evaluate the benchmark approach for the year 2016 and will develop an approach that may exclude some state benefit mandates from inclusion in the state’s essential health benefits package.
ADDITIONAL GUIDANCE
HHS issued the Bulletin to give consumers, states, employers and issuers up-to-date information as they work on establishing the Exchanges and making benefit decisions for 2014. The benchmark method outlined by HHS is not final, but it is a good indicator of the approach HHS intends to take to define essential health benefits. HHS encourages comments on the Bulletin, which are due by Jan. 31, 2012.
HHS intends to issue regulations in the future that will more formally outline its approach for defining essential health benefits. HHS also intends to issue guidance for other aspects of the essential health benefits package, such as cost-sharing (deductibles, copayments and coinsurance) rules for determining the plan’s actuarial value.
A Small Business Guide to Health Care Reform
Posted in News · May 26th, 2011
The Small Business Council of America website posted this brochure and timeline that details what smaller business need to know.