Now that the Supreme Court has upheld the Affordable Care Act (ACA) health care reform law, it's time to make sure your organization is ready to comply. Among the most urgent items on your to-do list: Coordinating closely with the payroll department to ensure you're ready to make sure employees’ tax documents reflect the value of their health benefits.
Reason: The ACA requires employers to report on W-2 statements the aggregate value of each employee’s health benefits. The reporting provision kicks in for 2012 W-2s, which you will distribute to employees early next year.
Note, however, that some employers will be exempt from the reporting requirement regardless of what the Supreme Court does. The IRS has issued what it calls transition relief, excusing certain employers and benefit plans from the requirement.
Who must report
If you filed at least 250 W-2s in 2011, you’ll be on the hook for reporting the aggregate cost of employees’ health benefits on their 2012 W-2s.
Who’s off the hook?
According to the IRS, here’s the list of excluded employers, plans and benefits. If the following describes your organization, you do not have to comply with the W-2 reporting requirement:
The following benefits do not have to be reported on W-2s:
- Employers that filed fewer than 250 W-2s in 2011
- Employers with a plan that is self-insured and not subject to COBRA, or is a multi-employer plan
- Employers that aren’t required to provide W-2s (e.g., retirees receive health benefits but no other reportable compensation or taxes).
If you provide early W-2s to terminating employees, you do not have to report the value of those employees’ health benefits.
- Benefits provided under employee assistance programs, wellness programs or on-site medical clinics, if employers don’t charge premiums for COBRA coverage.
- Dental and vision benefits that are offered under a separate policy or that employees can decline
- Specific disease or hospital/fixed indemnity plans that employees pay for with after-tax dollars and that are offered as noncoordinated benefits
- For discriminatory self-insured plans, the cost of the excess that’s included in highly compensated employees’ gross income
- Reimbursements of health premiums that are taken into income by 2% S corporation shareholder-employees.
Advice: Consult your organization’s tax advisor to double-check what you must do to comply with the law.