Presenting a live 110-minute teleconference with interactive Q&A Reporting Costs of Health Insurance on Employee W-2s: New Requirements Mastering the Procedures for Disclosing and Valuing Coverage Starting in 2013 THURSDAY, DECEMBER 20, 2012 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Norbert Kugele, Partner, Warner Norcross & Judd , Grand Rapids, Mich. Andy Anderson, Partner, Morgan Lewis & Bockius , Chicago For this program, attendees must listen to the audio over the telephone. Please refer to the instructions emailed to the registrant for the dial-in information. Attendees can still view the presentation slides online. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Reporting Costs of Health Insurance on Employee W-2s: New Requirements Seminar Dec. 20, 2012 Andy Anderson, Morgan Lewis & Bockius Norbert Kugele, Warner Norcross & Judd aanderson@morganlewis.com nkugele@wnj.com
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Agenda Overview 7 Employers subject to reporting requirement Applicable employer-sponsored coverage Aggregate cost Inclusions, exclusions, calculation methods Form W-2 reporting Planning considerations Questions 7
Overview 8 Patient Protection and Affordable Care Act ―Aggregate cost‖ of ―applicable employer - sponsored coverage‖ to be reported on Form W-2. Dress rehearsal for ―Cadillac tax‖ in 2018 IRS Notice 2010-69 IRS Notice 2011-28 IRS Notice 2012-9 Effective for 2012 Forms W-2 issued in January 2013 IRS Web site FAQs and chart updated May 2, 2012 http://www.irs.gov/newsroom/article/0,,id=237894,00.html. 8
Employers Subject To Reporting Requirement All employers, unless specifically excluded 9 Who is excluded: Employers who filed fewer than 250 forms W-2 for the previous year E.g., employers filing fewer than 250 2011 forms W-2 (issued in January 2012) not required to report on 2012 forms W-2 (issued in January 2013) Federally recognized Indian tribal governments 9
Applicable Employer-Sponsored Coverage ―Applicable employer - sponsored coverage‖ is: 10 Coverage under any employer-provided group health plan that is non-taxable to the employee Includes coverage for civilian employees under government plans 10
Applicable Employer-Sponsored Coverage (Cont.) ―Group health plan‖ 11 Any plan of, or contributed to by, an employer (or employee organization) to provide healthcare Insured or self-insured Good-faith application of a reasonable interpretation of rules 11
Applicable Employer-Sponsored Coverage (Cont.) Applicable employer-sponsored coverage excludes: 12 HIPAA excepted benefits (other than on-site clinics) Accident, disability and AD&D insurance Workers’ compensation insurance Liability insurance Long-term care Separate policy substantially for treatment of mouth or eyes Independent, non-coordinated benefits Specified disease, hospital or fixed-indemnity insurance 12
Aggregate Cost Total cost of coverage under all applicable employer-sponsored 13 coverage Aggregate cost includes: Costs paid by the employer and employee (pre-tax and post-tax premiums) Even if included in the employee’s gross income Domestic partner Dependent older than 26 13
Aggregate Cost (Cont.) Excluded from aggregate cost: 14 Archer MSAs HSAs Salary reductions-only FSAs Special rule for FSAs with ER credits, match, etc. Governmental plans for military 14
Aggregate Cost (Cont.) Additional exclusions (until future guidance is issued): 15 Multi-employer plans HRAs Stand-alone dental and vision plans EAPs, on-site clinics, wellness IF no COBRA premiums Self-insured church and other plans that are not subject to federal COBRA Any change to the transition relief will apply prospectively and will not apply to any calendar year beginning within six months of its issuance. If guidance issued by 6/30/12, then no earlier than 2013 If guidance issued by 7/30/12, then no earlier than 2014 15
Aggregate Cost (Cont.) ―Aggregate cost‖ to be determined under rules similar to COBRA 16 premiums Good-faith compliance No additional COBRA pricing guidance offered A welcome omission! 16
Aggregate Cost: Calculation Methods COBRA applicable premium method (minus 2%) 17 Premium charged method – for insured plans Modified COBRA premium method – for employer-subsidized coverage or if employer bases COBRA on prior-year premiums Also: Special rules for composite rates (e.g., single coverage class) Special rules for determining whether to include health FSA contributions (employer flex credits) 17
Aggregate Cost: More Rules Cost is determined on a calendar-year basis. Employers must track changes to the costs and coverage occurring during the calendar year. Mid-year cost changes When employees commence, change or terminate coverage Employer can use any reasonable method to determine the cost. New employees mid-month: Cost at beginning or end of month, or pro-rate Terminated employees: May report COBRA costs (or not) Can ignore retroactive changes after year-end Must be consistent for all employees in plan 18
Drilling Into The Details
Example Of Benefits To Be Included 20 Widget Company has 340 employees in 2011 and offers the following benefits: Major medical: Reported Dental (self-insured, integrated with medical): Reported Vision (non-integrated, insured): Must be excluded HRA: Need not be reported Health FSA with employer and employee contributions: Employee’s contributions are not reported. Employer contributions are reported IF the employee’s total salary reductions are less than the value of the Health FSA. 20
Example Of Reporting Requirements EAP: Must report if COBRA premiums are charged to employee; 21 Executive physicals: Reported Life insurance benefits: Not reported AFLAC supplemental insurance purchased through cafeteria plan: Reported Travel insurance program: Probably must be excluded 21
When Must Information Be Included On The W-2? Must begin reporting on 2012 W-2s issued beginning in January 22 2013 Thereafter, on all W-2s that are issued Includes W-2s issued to terminating employees who request an • immediate W-2 Aggregate cost of applicable employer-sponsored coverage is reported in Box 12, Code DD. 22
What About Terminated Employees? Transitional relief options: 23 Cost of coverage for portion of year covered as active employee Ignore COBRA Must use consistently for all terminated employees Costs of both pre- and post-employment coverage During 2012 only; not required to report costs on early W-2s issued before January 2013 No reporting is required for an individual to whom the employer is not otherwise required to issue a Form W-2, such as a retiree or former employee receiving no compensation. 23
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