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.
Section 9002 of the Patient Protection and Affordable Care Act (PPACA) requires all employers to disclose the aggregate cost of “applicable employer-sponsored coverage” on each employee’s Form W-2.
What is included as “applicable employer-sponsored coverage”?
For purposes of this reporting requirement, “applicable employer-sponsored coverage” includes coverage under any group health plan made available to an employee by the employer, regardless of whether the employer or the employee paid the cost, including coverage provided under FSAs, HSAs and HRAs. Applicable employer-sponsored coverage also includes coverage under any group health plan established and maintained by the U.S. government, the government of any state or its political subdivision, or by any agency or instrumentality of such government.
What is not included as “applicable employer-sponsored coverage”?
Applicable employer-sponsored coverage does not include:
Coverage only for a specified disease
Coverage for long-term care
Coverage only for accident insurance
Hospital indemnity or other fixed indemnity insurance
Does the W-2 reporting requirement apply to all employers who provide health coverage, regardless of the employer’s size?
Yes. The W-2 reporting requirement applies to any employer that provides health coverage for its employees if the employer is required to deduct and withhold employment or income taxes from an employee’s wages under Sections 3401 or 3402 of the Code.
When is this new requirement effective?
The new Form W-2 requirement is effective for taxable years beginning after 2010 (i.e., the 2011 W-2 due in January 2012). On October 12, 2010, the IRS announced that this W-2 reporting requirement will be optional in 2011 (see IRS Notice 2010-69). Employers choosing to delay the reporting requirement will not be penalized by the IRS. This delay is intended to give employers time to make changes in their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS is expected to publish additional guidance on the new Form W-2 reporting requirement before the end of 2010.
How is the aggregate cost of employer-sponsored coverage determined for a self-funded plan?
The aggregate cost of coverage is determined under rules similar to those for determining COBRA premiums (as set forth in Section 4980B(f)(4) of the Internal Revenue Code). Therefore, the aggregate cost of employer-sponsored coverage that must be reported on an employee’s W-2 is equal to the COBRA rate for the coverage option in which the employee is enrolled, less the 2% administrative charge that may be applied to COBRA coverage. For this purpose, FSAs, HSAs and Archer MSAs are excluded from the calculation.
Who will get the Form W-2?
Under current rules, employers file Form W-2 with the IRS and furnish a copy to each employee for wages subject to federal income and employment tax withholding. PPACA indicates reporting also will be required for former employees, retirees and surviving spouses, but it isn’t clear what IRS form(s) will be used. Further guidance from the IRS is expected.
Is this requirement a carrier requirement as well?
No. The requirement to report the aggregate cost of employer-sponsored coverage on an employee’s W-2 is an employer reporting requirement, not a carrier reporting requirement. Aetna will not take the responsibility for preparing and/or issuing W-2’s on behalf of its customers; however, Aetna will provide the health benefits data necessary for customers to fulfill their W-2 reporting requirements.
Does this reporting requirement change the tax treatment of the benefit to the employee?
No. With respect to the W-2 reporting, this is solely a reporting exercise and does not change the tax treatment of the benefit to the employee under the current law.
In what box on the W-2 is the aggregate cost of employer-sponsored coverage reported?
On October 12, 2010, the IRS issued a draft Form W-2, a copy of which may be found at the following web address: http://www.irs.gov/pub/irs-utl/draft_w-2.pdf . The draft Form W-2 issued indicates that the aggregate cost of employer-sponsored coverage will be reported in Box 12, using Code DD. It is expected that the IRS will publish additional guidance on the new Form W-2 reporting requirement before the end of 2010.
Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care, www.gninsurance.com , and overseas health care, http://onlineglobalhealthinsurance.com/my-travel-guard.asp , 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.