by admin | Jan 5, 2018 | ACA, Compliance, IRS
The ACA requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on Form W-2 does not mean that the coverage is taxable.
Employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). Federally recognized Indian tribal governments are not subject to this requirement.
Employers that are subject to this requirement should report the value of the health care coverage in Box 12 of Form W-2, with Code DD to identify the amount. There is no reporting on Form W-3 of the total of these amounts for all the employer’s employees.
In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. See the chart below from the IRS’ webpage and its questions and answers for more information.
The chart below illustrates the types of coverage that employers must report on Form W-2. Certain items are listed as “optional” based on transition relief provided by Notice 2012-9 (restating and clarifying Notice 2011-28). Future guidance may revise reporting requirements but will not be applicable until the tax year beginning at least six months after the date of issuance of such guidance.
|
Form W-2, Box 12, Code DD |
| Coverage Type |
Report |
Do Not
Report |
Optional |
| Major medical |
X |
|
|
| Dental or vision plan not integrated into another medical or health plan |
|
|
X |
| Dental or vision plan which gives the choice of declining or electing and paying an additional premium |
|
|
X |
| Health flexible spending arrangement (FSA) funded solely by salary-reduction amounts |
|
X |
|
| Health FSA value for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits |
X |
|
|
| Health reimbursement arrangement (HRA) contributions |
|
|
X |
| Health savings account (HSA) contributions (employer or employee) |
|
X |
|
| Archer Medical Savings Account (Archer MSA) contributions (employer or employee) |
|
X |
|
| Hospital indemnity or specified illness (insured or self-funded), paid on after-tax basis |
|
X |
|
| Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer |
X |
|
|
| Employee assistance plan (EAP) providing applicable employer-sponsored healthcare coverage |
Required if employer charges a COBRA premium |
|
Optional if employer does not charge a COBRA premium |
| On-site medical clinics providing applicable employer-sponsored healthcare coverage |
Required if employer charges a COBRA premium |
|
Optional if employer does not charge a COBRA premium |
| Wellness programs providing applicable employer-sponsored healthcare coverage |
Required if employer charges a COBRA premium |
|
Optional if employer does not charge a COBRA premium |
| Multi-employer plans |
|
|
X |
| Domestic partner coverage included in gross income |
X |
|
|
| Governmental plans providing coverage primarily for members of the military and their families |
|
X |
|
| Federally recognized Indian tribal government plans and plans of tribally charted corporations wholly owned by a federally recognized Indian tribal government |
|
X |
|
| Self-funded plans not subject to federal COBRA |
|
|
X |
| Accident or disability income |
|
X |
|
| Long-term care |
|
X |
|
| Liability insurance |
|
X |
|
| Supplemental liability insurance |
|
X |
|
| Workers’ compensation |
|
X |
|
| Automobile medical payment insurance |
|
X |
|
| Credit-only insurance |
|
X |
|
| Excess reimbursement to highly compensated individual, included in gross income |
|
X |
|
| Payment/reimbursement of health insurance premiums for 2% shareholder-employee, included in gross income |
|
X |
|
| Other situations |
Report |
Do Not
Report |
Optional |
| Employers required to file fewer than 250 Forms W-2 for the preceding calendar year (determined without application of any entity aggregation rules for related employers) |
|
|
X |
| Forms W-2 furnished to employees who terminate before the end of a calendar year and request, in writing, a Form W-2 before the end of the year |
|
|
X |
| Forms W-2 provided by third-party sick-pay provider to employees of other employers |
|
|
X |
By Danielle Capilla
Originally Published By United Benefit Advisors
by admin | Dec 12, 2017 | ACA, Benefit Management, Compliance, Group Benefit Plans, IRS
Beginning in 2015, to comply with the Patient Protection and Affordable Care Act (ACA), “large” employers must offer their full-time employees health coverage, or pay one of two employer shared responsibility / play-or-pay penalties. The Internal Revenue Service (IRS) determines the penalty each calendar year after employees have filed their federal tax returns.
In November 2017, the IRS indicated on its “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act” webpage that, in late 2017, it plans to issue Letter 226J to inform large employers of their potential liability for an employer shared responsibility payment for the 2015 calendar year.
The IRS’ determination of an employer’s liability and potential payment is based on information reported to the IRS on Forms 1094-C and 1095-C and information about the employer’s full-time employees that were received the premium tax credit.
The IRS will issue Letter 226J if it determines that, for at least one month in the year, one or more of a large employer’s full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed (and the employer did not qualify for an affordability safe harbor or other relief for the employee).
Letter 226J will include:
- A brief explanation of Section 4980H, the employer shared responsibility regulations
- An employer shared responsibility payment summary table that includes a monthly itemization of the proposed payment and whether the liability falls under Section 4980H(a) (the “A” or “No Offer” Penalty) or Section 4980H(b) (the “B” or “Inadequate Coverage” Penalty) or neither section
- A payment summary table explanation
- An employer shared responsibility response form (Form 14764 “ESRP Response”)
- An employee premium tax credit list (Form 14765 “Employee Premium Tax Credit (PTC) List”) which lists, by month, the employer’s assessable full-time employees and the indicator codes, if any, the employer reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C
- Actions the employer should take if it agrees or disagrees with Letter 226J’s proposed employer shared responsibility payment
- Actions the IRS will take if the employer does not timely respond to Letter 226J
- The date by which the employer should respond to Letter 226J, which will generally be 30 days from the date of the letter
- The name and contact information of the IRS employee to contact with questions about the letter
If an employer responds to Letter 226J, then the IRS will acknowledge the response with Letter 227 to describe further actions that the employer can take.
After receiving Letter 227, if the employer disagrees with the proposed or revised shared employer responsibility payment, the employer may request a pre-assessment conference with the IRS Office of Appeals. The employer must request the conference by the response date listed within Letter 227, which will be generally 30 days from the date of the letter.
If the employer does not respond to either Letter 226J or Letter 227, then the IRS will assess the proposed employer shared responsibility payment amount and issue a notice and demand for payment on Notice CP 220J.
Notice CP 220J will include a summary of the employer shared responsibility payment, payments made, credits applied, and the balance due, if any. If a balance is due, Notice CP 220J will instruct an employer how to make payment. For payment options, such as an installment agreement, employers should refer to Publication 594 “The IRS Collection Process.”
Employers are not required to make payment before receiving a notice and demand for payment.
The ACA prohibits employers from making an adverse employment action against an employee because the employee received a tax credit or subsidy. To avoid allegations of retaliation, as a best practice, employers who receive a Letter 226J should separate their employer shared responsibility penalty assessment correspondence from their human resources department and employees who have authority to make employment actions.
By Danielle Capilla
Originally Published By United Benefit Advisors
by admin | Nov 30, 2017 | ACA, Employee Benefits, IRS
On December 13, 2016, President Obama signed the 21st Century Cures Act (Cures Act) into law. The Cures Act provides a method for certain small employers to reimburse individual health coverage premiums up to a dollar limit through HRAs called “Qualified Small Employer Health Reimbursement Arrangements” (QSE HRAs). The provision went into effect on January 1, 2017. On October 31, 2017, the IRS released Notice 2017-67, providing guidance on the implementation and administration of QSE HRAs.
Unless an employer meets all the requirements for offering a QSE HRA, previous IRS guidance prohibiting the reimbursement of individual premiums directly or indirectly, after- or pre-tax, through an HRA, a Section 125 plan, a Section 105 plan, or any other mechanism, remains in full effect. Reimbursing individual premiums in a non-compliant manner will subject an employer to a Patient Protection and Affordable Care Act (ACA) penalty of $100 a day per individual it reimburses, with the potential for other penalties based on the mechanism of the non-compliant reimbursement.
If an employer fails to meet the requirements of providing a QSE HRA, it will be subject to a penalty of $100 per day per affected person for being a non-compliant group health plan. An arrangement will be a group health plan that is not a QSE HRA if it:
- Is not provided by an eligible employer (such as an employer that offers another group health plan to its employees).
- Is not provided on the same terms to all eligible employees.
- Reimburses medical expenses without first requiring proof of minimum essential coverage (MEC).
- Provides a permitted benefit in excess of the statutory dollar limits.
An arrangement’s failure to be a QSE HRA will not cause any reimbursement of a properly substantiated medical expense that is otherwise excludable from income to be included in the employee’s income or wages. Furthermore, an arrangement designed to reimburse expenses other than medical expenses (whether or not also reimbursing medical expenses) is neither a QSE HRA nor a group health plan. Accordingly, all payments under such an arrangement are includible in the employee’s gross income and wages. An employer’s failure to timely provide a compliant written notice does not cause an arrangement to fail to be a QSE HRA, but instead results in the penalty of $50 per employee, not to exceed $2,500.
Answers to Top Three FAQs about QSE HRAs
1, Which employers may offer a QSE HRA?
Employers with fewer than 50 full-time and full-time equivalent employees (under ACA counting rules) that do not offer a group health plan. Employers that do not offer a group health plan, but offer a retiree-only plan to former employees may offer a QSE HRA.
2. Which employers may not offer a QSE HRA?
- Employers with 50 or more full-time and full-time equivalent employees (under ACA counting rules).
- Employers of any size that offer a group health plan, including plans that only provide excepted benefits, such as vision or dental benefits.
- Employers that provide current employees with access to money from health reimbursement arrangements (HRAs) offered in prior years (through a carry-over).
- Employers that offer employees access to carryover amounts in a flexible spending account (FSA).
3. What are the rules for employers in a controlled group?
- Employers with less than 50 full-time and full-time equivalent employees (under ACA counting rules) may offer QSE HRAs, with the headcount including all employees across an entire controlled group.
- If one employer within a controlled group offers a QSE HRA, it must be offered to all employees within the entire controlled group (or each employer must offer an identical QSE HRA).
BY Danielle Capilla
Originally Published By United Benefit Advisors
by admin | Nov 27, 2017 | ACA, COBRA, IRS
Recently, the Internal Revenue Service (IRS) issued the instructions for Forms 1094/1095 for the 2017 tax year, announced PCORI fees for 2017-18, and announced cost-of-living adjustments for 2018. The IRS provided additional guidance on leave-based donation programs’ tax treatment and released an information letter on COBRA and Medicare. Here’s a recap of these actions for your reference.IRS Announces Cost-of-Living Adjustments for 2018
The IRS released Revenue Procedures 2017-58 and Notice 2017-64 to announce cost-of-living adjustments for 2018. For example, the dollar limit on voluntary employee salary reductions for contributions to health flexible spending accounts (FSAs) is $2,650, for taxable years beginning with 2018.
Request UBA’s 2018 desk reference card with an at-a glance summary of the various limits.
IRS Announces PCORI Fee for 2017-18
The IRS announced the Patient-Centered Outcomes Research Institute (PCORI) fee for 2017-18. The fee is $1.00 per covered life in the first year the fee is in effect. The fee is $2.00 per covered life in the second year. In the third through seventh years, the fee is $2.00, adjusted for medical inflation, per covered life.
For plan years that end on or after October 1, 2016, and before October 1, 2017, the indexed fee is $2.26. For plan years that end on or after October 1, 2017, and before October 1, 2018, the indexed fee is $2.39.
For more information, view UBA’s FAQ on the PCORI Fee.
IRS Provides Additional Guidance on Leave-Based Donation Programs’ Tax Treatment
Last month, the IRS provided guidance for employers who adopt leave-based donation programs to provide charitable relief for victims of Hurricane and Tropical Storm Irma. This month, the IRS issued Notice 2017-62 which extends the guidance to employers’ programs adopted for the relief of victims of Hurricane and Tropical Storm Maria.
These leave-based donation programs allow employees to forgo vacation, sick, or personal leave in exchange for cash payments that the employer will make to charitable organizations described under Internal Revenue Code Section 170(c).
The employer’s cash payments will not constitute gross income or wages of the employees if paid before January 1, 2019, to the Section 170(c) charitable organizations for the relief of victims of Hurricane or Tropical Storm Maria. Employers do not need to include these payments in Box 1, 3, or 5 of an employee’s Form W-2.
IRS Releases Information Letter on COBRA and Medicare
The IRS released Information Letter 2017-0022 that explains that a covered employee’s spouse can receive COBRA continuation coverage for up to 36 months if the employee became entitled to Medicare benefits before employment termination. In this case, the spouse’s maximum COBRA continuation period ends the later of: 36 months after the employee’s Medicare entitlement, or 18 months (or 29 months if there is a disability extension) after the employment termination.
By Danielle Capilla
Originally Published By United Benefit Advisors
by admin | Nov 17, 2017 | Benefit Management, Health Plan Benchmarking, Johnson & Dugan News
We recently unveiled the latest findings from our 2017 Health Plan Survey. With data on 20,099 health plans sponsored by 11,221 employers, the UBA survey is nearly three times larger than the next two of the nation’s largest health plan benchmarking surveys combined. Here are the top trends at a glance.
Cost-shifting, plan changes, and other protections influenced rates
- Sustained prevalence of and enrollment in lower-cost consumer-driven health plans (CDHPs) and health maintenance organization (HMO) plans kept rates lower.
- For yet another year, “grandmothered” employers continue to have the options they need to select cheaper plans (ACA-compliant community-rated plans versus pre-ACA composite/health-rated plans) depending on the health status of their groups.
- Increased out-of-network deductibles and out-of-pocket maximums, with greater increases for single coverage rather than family coverage, as well as prescription drug cost shifting, are among the plan design changes influencing premiums.
- UBA Partners leveraged their bargaining power.
Overall costs continue to vary significantly by industry and geography
- Retail, construction, and hospitality employees cost the least to cover; government employees (the historical cost leader) continue to cost among the most.
- As in 2016, plans in the Northeast cost the most and plans in the Central U.S. cost the least.
- Retail and construction employees contribute above average to their plans, so those employers bear even less of the already low costs in these industries, while government employers pass on the least cost to employees despite having the richest plans.
Plan design changes strained employees financially
- Employee contributions are up, while employer contributions toward total costs remained nearly the same.
- Although copays are holding steady, out-of-network deductibles and out-of-pocket maximums are rising.
- Pharmacy benefits have even more tiers and coinsurance, shifting more prescription drug costs to employees.
PPOs, CDHPs have the biggest impact
- Preferred provider organization (PPO) plans cost more than average, but still dominate the market.
- Consumer-driven health plans (CDHPs) cost less than average and enrollment is increasing.
Wellness programs are on the rise despite increased regulations and scrutiny
Metal levels drive plan decisions
- Most plans are at the gold or platinum metal level reflecting employers’ desire to keep coverage high. In the future, we expect this to change since it will be more difficult to meet the ACA metal level requirements and still keep rates in check.
Key trends to watch
- Slow, but steady: increase in self-funding, particularly for small groups.
- Cautious trend: increased CDHP prevalence/enrollment.
- Rapidly emerging: increase of five-tier and six-tier prescription drug plans.
By Bill Olson
Originally posted by www.UBABenefits.com
