Aflac's Workforces Report for Brokers recently divulged that nearly 50 percent of brokers are considering leaving the industry, due largely to a landscape vastly changed by PPACA. Employee health benefits have become an increasingly complex industry in the past four years — which is precisely the reason that a solid broker workforce is more needed than ever. When it comes to reporting requirements, your employer clients need advice on everything from W-2 reporting to treatment of self-insured plans to reporting around minimum essential coverage. Here, you'll find answers.
1. What is the W-2 reporting requirement and when is it effective?
Employers, including those with grandfathered plans, must report the “aggregate cost” of “applicable employer sponsored coverage” on an employee’s Form W-2. This cost generally consists of employer-sponsored coverage under a group health plan (insured or self-funded) that is excludable from the employee's gross income. IRS Notice 2012-9 supersedes earlier notices that delayed and created exceptions to the PPACA W-2 reporting requirement, which originally was to apply for 2011 W-2s that normally would be issued by employers in January 2012. The W-2 reporting requirement, which was delayed by the IRS, first applies to 2012 W-2s that generally will be issued in January 2013 unless an exception (discussed in Q5) applies.
5. Which employers are exempt from the W-2 reporting requirement?
The W-2 reporting requirement does not apply to the following:
- Employers with fewer than 250 W-2s issued for the prior calendar year until further notice.
- An employer that would have filed only 100 Forms W-2 for the previous year had it not used an agent under Code Section 3504 will not be subject to the reporting requirement for the year, nor will an agent under Code Section 3504 with respect to that employer's Forms W-2 for the year. In contrast, if the same employer would have filed 300 Forms W-2 for the previous year had it not used an agent under Code Section 3504, that employer would be subject to the reporting requirement for the year. If an agent under Code Section 3504 is used again, the information will need to be provided to the agent and reported on the Form W-2.
- An employer is not required to report any amount in Box 12 using Code DD for an employee who, pursuant to §31.6051-1(d)(1)(i), has requested to receive a Form W-2 before the end of the calendar year during which the employee terminated employment.
- Coverage under a flexible spending arrangement if contributions occur only through employee salary reductions.
- “Excepted benefits,” which include dental and vision plans offered under a separate policy, certificate, or contract of insurance, or if the participants have the right to elect the dental or vision benefits and, if they do, pay an additional premium or contribution.
- Excess reimbursements that are includible in the income of highly compensated individuals under Code Section 105(h) or payments or reimbursements of health insurance premiums for a 2 percent shareholder-employee of an S corporation.
- The cost of hospital or other fixed indemnity coverage, or coverage only for a specified disease or illness, is not reportable if the coverage is offered as an independent, noncoordinated benefit and is includible in the employee’s income or paid for on an after-tax basis. However, the cost of such coverage is reportable when paid for on a pre-tax basis under a cafeteria plan or with employer contributions that are excludable from income.
6. What about related employers that each employ and pay the same person?
Related employers that do not use a common paymaster can either provide the full reportable cost to an employee on a single Form W-2 or allocate the cost and reporting among the employers. The notice does not define the term “related employers.” Presumably, it means related employers as defined for W-2 purposes. This definition includes the following types of corporations if they satisfy any one of the following four tests at any time during a calendar quarter:
13. In addition to the W-2 reporting, what other reporting must employers make to the IRS and covered individuals?
Healthcare reform requires any person who provides “minimum essential coverage” to an individual during a calendar year to report certain health insurance coverage information to the IRS. Reporting is required for grandfathered plans. No reporting is required for “excepted benefits.” The employer must also provide a written statement to the covered individual, as discussed in Q26.
14. When does this reporting requirement go into effect?
The requirement for Reporting of Health Insurance Coverage originally was to be effective in 2014. However, IRS Notice 2013-45, issued in July 2013, provided a one-year delay to three reporting requirements under the healthcare reform law.
17. What new effective dates did the July 2013 Notice provide?
The Notice advises that the IRS will in the summer of 2013 propose regulations for the two information-reporting provisions now effective in 2015. The IRS encourages employers, insurers and other reporting entities to voluntarily comply with the proposed rules for information reporting for 2014, but no penalties for failure to comply with these reporting provisions now exist for 2014.
18. Why were the reporting requirements postponed?
The information reporting required by Code Sections 6055 and 6056 must occur in order for the IRS to enforce and administer the employer mandate requirements under Code Section 4980H. The employer mandate penalties are triggered if one or more of an applicable large employer’s full-time employees are entitled to premium tax credits for the purchase of insurance on a state exchange marketplace under Code § 36B and (1) the employer fails to offer 95 percent of full-time employees and their dependents the opportunity to enroll in minimum essential coverage or (2) the employer offers full-time employees and dependents the opportunity to enroll in minimum essential coverage but the coverage is not affordable or does not provide minimum value. The second penalty can never exceed the first penalty.
20. Were any 2014 requirements of the PPACA affected by the extension of the effective date of these reporting requirements?
No. The Notice makes clear that the 2014 transition relief is limited solely to these three items and has no effect on the effective date or application of other provisions under the Act, many of which go into effect in 2014. For example, the transition relief has no effect on the provisions taking effect in 2014 as to premium tax credits for those purchasing subsidized health insurance on an exchange marketplace or the individual mandate requirements under Code § 5000A for individuals to maintain healthcare coverage for themselves or pay penalties.
21. What are some of the 2014 requirements that were not affected by the postponement of these three reporting requirements?
Provisions taking effect for Plan Years beginning on or after Jan. 1, 2014 include the following:
24. When is this reporting requirement effective?
The Code Section 6055 reporting requirement is first required for coverage provided on or after January 1, 2014. The first information returns will be filed in 2015.
25. What information must be reported to the IRS?
The return is on a form provided by the IRS and must contain the following information: