W2 Reporting Guidance Issued
This is a short month on news.
A lot went on as usual, but there was not as much to report.
- Small Employers filing less than 250 W2's Voluntary through 2012
- What can I use my FSA, HSA or HRA on? IRS Publication 502.
- Studies to Commence on "Essential Health Benefits".
- 1099 Repeal Signed Into Law
Small Employers (filing less than 250 W2's) Voluntary through 2012 -
IRS Issues Interim Guidance on Informational Reporting of Employer-Sponsored Health Coverage.
Reporting is Voluntary for All Employers for 2011 and Small Employers for 2012
IR-2011-31, March 29, 2011
WASHINGTON — The Internal Revenue Service today issued interim guidance to employers on informational reporting on each employee's annual Form W-2 of the cost of the health insurance coverage they sponsor for employees. The IRS is also requesting comments on this interim guidance. The IRS emphasized that this new reporting to employees is for their information only, to inform them of the cost of their health coverage, and does not cause excludable employer-provided health coverage to become taxable; employer-provided health coverage continues to be excludable from an employee's income, and is not taxable.
The Affordable Care Act provides that employers are required to report the cost of employer-provided health care coverage on the Form W-2. Notice 2010-69, issued last fall, made this requirement optional for all employers for the 2011 Forms W-2 (generally furnished to employees in January 2012). In today's guidance, the IRS provided further relief for smaller employers (those filing fewer than 250 W-2 forms) by making this requirement optional for them at least for 2012 (i.e., for 2012 Forms W-2 that generally would be furnished to employees in January 2013) and continuing this optional treatment for smaller employers until further guidance is issued.
Using a question-and-answer format, Notice 2011-28 also provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012. The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage.
The 2011 Form W-2, prior IRS Notice 2010-69 deferring the reporting requirement for 2011, and Notice 2011-28 containing the new guidance are available on IRS.gov.
Employer-Provided Health Coverage Informational Reporting Requirements: Frequently Asked Questions
Health Care: W-2 Health Insurance Reporting: English
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What can I use my FSA, HSA or HRA on? IRS Publication 502
IRS Publication 502 - This publication provides information about deductible expenses that can be reimbursed or paid by health FSAs, HSAs, or HRAs. The latest version of Publication 502 clarifies health insurance costs for self-employed individuals and the health care tax credit. Additionally, several areas have been updated to reflect changes made by the COBRA premium assistance subsidy.
Aslo look at IRS Publication 969 - This publication has been updated to show that tax-free health FSA and HRA coverage and reimbursement are permitted beginning March 30, 2010 for employees' children who are under age 27 at the end of the employee's taxable year. Additionally, the publication also addresses the increase to 20% in tax on HSA and MSA distributions that are not used for qualified medical reimbursements. The new requirement that there must be a prescription on OTC drugs purchased after 2010 has also been added.
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Studies to Commence on "Essential Health Benefits".
On January 13, 2011, HHS requested the Institute of Medicine (IOM) to study and make recommendations on the criteria for determining "essential health benefits." Essential health benefits are referred to under PPACA to describe the benefits that are subject to the prohibition on lifetime and annual limits, as well as to describe the benefits that must be offered through the state exchanges. While the specific definitions may not be available for quite some time, the intent is to make them more specific in order to provide enough flexibility in the marketplace.
The IOM is expected to publish a report in September setting forth the criteria for HHS officials to define which treatments are "essential health benefits" requiring coverage. Please note there is no mandate to provide "essential health benefits," except for preventive services required by non-grandfathered plans. If the plan voluntarily offers the essential health benefits, the plan must comply with the annual and lifetime limit restrictions for those benefits.
In addition to the studies on essential health benefits, the DOL is surveying employer plans to determine the benefits typically covered by such plans. Instead of conducting a new survey, the DOL will use previously collected data pulled from the DOL's National Compensation Survey, which lists 10 general categories of care that must be covered as essential benefits.
Advocate groups say there are major holes in the NCS data; however, under the circumstances, it may be the best the DOL has for the time being. Additionally the Bureau of Labor Statistics will begin analyzing plan documents on the categories of benefits identified as essential in PPACA, and produce estimates of the percent of employees with access to plans that cover each of these services. This information should be available by March 2011.
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1099 Repeal Signed Into Law
President Obama signed into law a bill that would repeal the 1099 business tax-reporting requirement under the Affordable Care Act. The provision required businesses and real estate owners to file a 1099 form for every vendor to whom they paid more than $600 in a year.
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How does Carter's Benefits help ?
We continue to stay on top of changes in this industry. In a consultative role, Eddie Carter has begun hosting live seminars to update employers and Human Resource Managers on these changes. If you would like to host a meeting with your local community or civic organization, please contact me for details.