Good Neighbor Insurance (www.gninsurance.com and www.gninsurance.com) is continuing to update our clients on the new health insurance laws. There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work. Many critical details of this new insurance law will be clarified in the months and years to come.
These six major coverage options are:
(1) Individual or family coverage (private health care plans)
(2) Employee/employer group option for small businesses (typically under 50 employees)
(3) Employee/employer group option for large businesses (typically larger than 50 employees)
(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)
(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards
(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.
* Effective January 1, 2011 – Employers required to report aggregate value of the benefits they provide for all health coverage, excluding salary reduction contributions to medical FSAs, on employees’ W-2 forms.
* Effective January 1, 2018 – Plan administrators or insurers will be charged a 40% excise tax if the total value of the employer-sponsored health coverage (dental and vision plans excluded) is above $10,200 for single coverage or $27,500 for family coverage.
Who is responsible for reporting insurance value on Forms W-2?
Employers are required to report the aggregate value of the benefit they provide for all health insurance coverage, excluding coverage for stand alone vision and dental plans and salary reduction contributions under health FSAs, on employees’ Forms W-2.
What is the Cadillac Plan Tax?
Effective January 1, 2018, plan administrators or insurers will be charged a 40 percent excise tax if the total value of the employer-sponsored health insurance coverage is above $10,200 for single coverage or $27,500 for family coverage. For high-risk professions and qualified retirees, the figures change to $11,850 for single coverage and $30,950 for family coverage. Note that the IRS has not finalized the regulations on this provision.
What constitutes the total value of the employer premium that must be reported on the Form W-2?
Form W-2 must include the combined cost of the employer-sponsored health coverage taking into account both the amount the employer pays and the amount the employee pays. The value will then be determined under rules similar to COBRA. The aggregate cost will specifically exclude stand alone vision and dental plans and salary reduction contributions under a health FSA. The IRS will be issuing further guidance.
Is reporting the value of insurance on Form W-2 informational or a taxable component?
The Form W-2 provision for reporting the total value of health insurance is informational and does not change the taxability.
Does the W-2 Reporting Requirement mean that the value of health insurance will be taxable to employees?
The Health Care Reform Act includes a provision that all employers must report the total value of employer-sponsored insurance coverage, excluding salary reduction contributions under medical flexible spending accounts (FSAs), on employees’ Forms W-2 beginning with tax year 2011.
There is much speculation in the public and political arena about how this information will affect taxable income and corresponding taxes paid by employers and employees. There is no indication, at this time, or reason to believe that this reporting requirement is an indicator that insurance coverage will be taxed simply because it’s reportable on Form W-2.
Certain employer contributions to discriminatory health plans may result in taxable income to the employee; however, this is not a result of the W-2 reporting requirement included in the Health Care Reform Act. Neither the Secretary of Health and Human Services nor the Internal Revenue Service (IRS) has provided specifics regarding the W-2 reporting requirement for 2011.
In 2011 when we have to start including the cost of the insurance premium we pay for an employee (currently 100%), will it be subject to social security and Medicare tax by the employer and employee?
Neither the Secretary of Health and Human Services nor the Internal Revenue Service have provided guidance on the Form W-2 reporting requirement, which is effective for tax years beginning after December 31, 2010; however, we know of no indication nor have reason to believe that the reporting requirement is an indicator that the value of employer-sponsored insurance coverage will be taxable simply by virtue of being employer-sponsored coverage reportable on the Form W-2. Certain employer contributions to discriminatory health plans may result in taxable income to the employee; however, such treatment is not a result of the Form W-2 reporting requirement of PPACA. Tax structure for employee and employer contributions for the most part have not changed under the new law. The only notable exception was the expansion of the tax exclusion of adult dependents to the age of 27 under section 125 plans. This change allows more dependents covered under their parents’ employer’s section 125 plan to be excluded from tax contributions, essentially reducing tax liability.
Will employees be required to pay federal, state, or local tax against the value of their health insurance?
Neither the Secretary of Health and Human Services nor the Internal Revenue Service have provided guidance on the Form W-2 reporting requirement, which is effective for tax years beginning after December 31, 2010; however, we know of no indication nor have reason to believe that the reporting requirement is an indicator that the value of employer-sponsored insurance coverage will be taxable simply by virtue of being employer-sponsored coverage reportable on the Form W-2. Certain employer contributions to discriminatory health plans may result in taxable income to the employee; however, such treatment is not a result of the Form W-2 reporting requirement of PPACA. Tax structure for employee and employer contributions for the most part have not changed under the new law. The only notable exception was the expansion of the tax exclusion of adult dependents to the age of 27 under Section 125 plans. This change allows more dependents covered under their parents’ employer’s section 125 plan to be excluded from tax contributions, essentially reducing tax liability.
Will employees be taxed on both the employee and employer cost of the health insurance plan?
Neither the Secretary of Health and Human Services nor the Internal Revenue Service have provided guidance on the Form W-2 reporting requirement, which is effective for tax years beginning after December 31, 2010; however, we know of no indication nor have reason to believe that the reporting requirement is an indicator that the value of employer-sponsored insurance coverage will be taxable simply by virtue of being employer-sponsored coverage reportable on the Form W-2. Certain employer contributions to discriminatory health plans may result in taxable income to the employee; however, such treatment is not a result of the Form W-2 reporting requirement of PPACA. Tax structure for employee and employer contributions for the most part have not changed under the new law. The only notable exception was the expansion of the tax exclusion of adult dependents to the age of 27 under section 125 plans. This change allows more dependents covered under their parents’ employer’s section 125 plan to be excluded from tax contributions, essentially reducing tax liability.
If a small employer doesn’t offer group health insurance but pays accident insurance, does that premium need to be reported on the Form W-2?
Plans in which coverage costs must be reported on Form W-2 include medical, prescription, executive physicals, on-site clinics, Medicare supplemental policies, and employee assistance programs. The cost of coverage of stand-alone dental and vision plans and specific disease or hospital/fixed indemnity plans is excluded from the reporting requirement.
What premiums need to be included on the Form W-2?
Employer-sponsored coverage under the Form W-2 reporting requirement generally includes (but is not limited to): major medical coverage; amounts an employer contributes to a health reimbursement account (HRA); Medicare supplemental coverage; employer-provided Medicare Advantage plans; and limited benefit plans. Coverage under dental and vision plans are also included unless they are “stand-alone” plans.
Does Form W-2 recording apply to all employers?
Yes, but not until tax year 2011.
Does the Form W-2 insurance premium reporting begin for the 2010 Form W-2 or 2011?
The Form W-2 reporting requirement is effective for calendar years starting January 1, 2011. The aggregate cost of employer-sponsored health coverage will need to be included on the 2011 Form W-2, which must be released by January 31, 2012.
Does insurance still need to be reported on Forms W-2 if a section 125 is in place?
Whether group health insurance premiums are deducted from an employee’s pay on a pretax or post-tax basis does not affect whether it needs to be reported on the Form W-2. According to the new health care reform law, the combined cost of employer-sponsored health coverage must be included on the employee’s Form W-2. This combined cost specifically excludes salary reduction contributions under a section 125 health FSA, not the premiums under the premium portion of the section 125.
Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care, www.gninsurance.com , information with him at all times when he travels Keep our blog close by you, www.gntravelinsurance.com, for continual updates on the changes with the US health care system.
