W-2 Informational Reporting Obligations Under IRC 6051(a)(14)

Transcription

1 AFFORDABLE CARE ACT W-2 AGGREGATE COST REPORTING COMPLIANCE PREPARING FOR 2012 AND BEYOND GJ Stillson MacDonnell Mendelson, San Francisco Shareholder Littler PANELIST: Stephen Tackney, Special Counsel to Division Counsel Office of Chief Counsel Internal Revenue Service Washington, DC MODERATOR AND POWERPOINT DEVELOPER: GJ Stillson MacDonnell, Shareholder Littler Mendelson, P.C. San Francisco, California W-2 Informational Reporting Obligations Under IRC 6051(a)(14) Patient Protection and Affordable Care Act (PL ) 9002(a) amended IRC 6051(a) to add subsection (14) and 6 lines of text to create considerable W-2 reporting obligations. Concept: provide useful & comparable consumer information, via the annual W-2 form, that will provide employees cost information regarding certain employer sponsored group health coverage. Help employees understand cost of such coverage. Imposes on the employer the obligation to report cost of such group health coverage. Reporting is informational only. In sum, W-2 must include the aggregate cost of certain employersponsored coverage or Reportable Coverage

2 Phased in Reporting Calendar year 2011 reporting was optional only Calendar year 2012 include on 2012 W-2, only if employer issues 250 or more IRS W-2 forms (don t count K-1s) in 2011 Not an end of year employee count Counting total W-2 issued even if an employee was not eligible for or participated in a covered group health plan Calendar year 2013 reporting requirements not set, but under 250 exclusion extends for at least 6 months after further guidance. What is Reportable Coverage? Coverage is any group health planmade available to employees that is excludable from income tax under IRC 106. Includes plans maintained or contributed to by an employer providing health care to employees, former employees and eligible family members. Pending further regulations, a group health plan can be identified using plans covered, by type, under COBRA regulations (Treas. Reg B, Q/A 1). Employer does not have to pay any part of coverage, to have plan included. Such plans can be insured or self-funded.

3 Group medical coverage Examples of Reportable Coverage Dental and/or vision plans integrated in group medical plan rather than standalone plans Employer contributions (i.e. flex-credits) to FSA but not when solely pre-tax employee funded contributions Disease specific coverage sometimes On site medical clinics (if providing more that de minimis care) and subject to separate COBRA premium (optional) Hospital or fixed indemnity, paid on pre-tax basis EAP, if subject to separate COBRA premium (optional) Medicare supplemental policies Examples of Plans Excluded from Employer-Sponsored Plans Health savings accounts (IRC 223(d)) Flexible Benefits Plans to the extent solely funded by salary reduction (IRC 106(c)(2) and 125) Long-term care plans Health reimbursement (HRA) unless employer elects to report coverage Wellness programs sometimes? Archer MSA (IRC 220(d)) Self-insured church plans Multi-employer plans (CBA plans) Employee paid hospital or fixed indemnity insurance, paid on an after-tax basis Government plans covering military and their families Plans of federally recognized Indian Tribal governments

4 What Must an Employer Do? Identify reportable coverage (employer-sponsored) plans subject to law. Determine aggregate cost of such employer-sponsored coverage(s) on a calendar year basis. Report coverage on W-2, box 12 and code DD cost of such coverage(s) If employee terminated before January 2 of the year W-2 is issued in and requested W-2 before then, no box 12 code DD reporting obligation need be provided to that employee. How to Determine Aggregate Costs Requires valuing the premium cost (after and pre-tax) of covered plans. Include both employer and employee paid costs. Include coverage cost for employee and family members and imputed income, such as in the case of non-dependent domestic partner coverage. Interim guidance allows for the use of COBRA premium calculation methodologies exclusive of 2% administrative fee, when calculating such costs. Since reporting obligations include partial year coverage or in year changes in premiums, calculation of calendar month premiums is recommended.

5 Premium Alternative Methodologies Employer can use different methods for different plans As to calculation for any particular plan, employer must use same calculation method for all employees Three methods that can be used: COBRA applicable premium method Premium charged method Modified COBRA premium method Special Employer Issues Who Issues W-2? If employee works for multiple relatedcompanies in same year with one company acting as common paymaster under IRC, then only one W-2, so all covered employer-sponsored coverage reported on the W-2. If no common paymaster but concurrent employment, can aggregate or report separately. Can result in need to divide coverage by employer, when reporting. If employee has multiple unrelated employers in a year, each W-2 will include the covered coverage cost associated with each employer. If an employer is a successor employer under Rev. Proc , then last employer should aggregate reportable costs otherwise both report separately. Cost of coverage for employees covered by multi-employers (i.e. union) plans are not reportable by employer, under current regulations. Highly compensated employees receiving taxable excess reimbursements -such reimbursements are excluded from aggregate reportable costs.

6 Penalties for Non-compliance Penalties are information return penalties IRC 6721 Failure to file correct information by the due date penalties If late: civil penalties per form range from $30 to $100 per form Intentional disregard with respect to either filing or correct information, at least $250 per form with no cap Can be penalized for failure to correct W-2 statement Preparing for 2012 Reporting Checklist For 2012 reporting, employer should determine estimated number of W-2 issued for 2011, if 250 or more, continue to next steps for 2012, if not, defer for 2013 Employer needs to identify employer-sponsored coverage Review current COBRA calculation methods used and determine what method employer can/should use for 2012 reporting purposes If new or different employer-sponsored coverage is anticipated for 2012, add to list continued

7 Preparing for 2012 Reporting Develop method for maintaining or cumulative basis cost associated with each plan and coverage option Create a payroll-related association with individual employees that can provide for automatic updating as employee coverage changes Coordinate with payroll service for the inclusion of aggregate costs on 2012 (as applicable) or 2013 W-2 forms Review and update cost information regularly to correspond with changes in plan costs and premium and coverage elections IRS Guidance Interim IRS Guidance IR (3/29/11) voluntary reporting for 2011 IRS Notice interim guidance in Q/A format IRS Notice model W-2 and provides for no penalties for failure to file for 2011 IRS Notice clarifications and prospective guidance on reporting requirements and modifications

8 Questions and Answers