Health care reform
January 3, 2012
On Tuesday, January 3, 2012 the Internal Revenue Service (IRS) issued additional guidance for employers and benefits professionals regarding the W-2 health benefits cost reporting requirements that begin in 2012.
Previous to this IRS announcement, benefits advisors and administrators voiced questions about how hospital indemnity insurance, critical illness insurance, FSAs and health benefits other than major medical coverage might fit into the new reporting system.
Q & A number 37 in IRS Notice 2012-9 explains that:
When benefits are reportable, the W-2 total should include the aggregate cost — the total of the portion paid by the employer and the portion paid by the employee. Employers are responsible for this reporting even when their disability providers also issue W-2s for paid disability benefits.
The federal government will use the data collected from the W-2 cost reporting requirement to gain a better understanding of the aggregate value of health insurance and other coverage and services that are being provided through employers.
At present, this W-2 reporting is the only way the government has set up to collect this information. It is the same information the government will need in 2018 to determine whether an employer’s plan meets the threshold for the 40% “Cadillac” excise tax. The government has not yet said whether it will use the W-2 reporting as the means to gather that information or whether it will implement a new method for assessing the tax.
According to the legislation and IRS guidance, employers must report costs for:
Employers do not need to report costs of:
The notice also includes additional guidance on other health insurance reporting considerations.
Impact on employers:
Impact on employees/individuals:
This publication is informational only; it does not cover all the guidance, issues and requirements surrounding W-2 health plan cost reporting, nor does it constitute legal or accounting advice with respect to your particular factual circumstances. This publication is not intended or written to support promotion or marketing of any of the matters addressed, and is not a substitute for consultation with your professional advisors. We encourage you to consult with your own attorney advisors about your W-2 reporting responsibilities before deciding how you’ll comply with these new requirements.