HCR-Update: IRS Delays W-2 Reporting; Self Funding Report

Highlights of recent regulations released by the IRS:

1. The regulations emphasize that the reported amounts are for employee information only and does not cause excludable employer-provided health care to become taxable. Separate legislation would need to be enacted for this to occur.
2.  Reporting is optional for the 2011 calendar year, but mandatory for many employers beginning with the 2012 calendar year (i.e., for W-2s produced in January 2013).
3. Employers who issue fewer than 250 W-2s for the 2011 calendar year (i.e., produced in January 2012), are exempt from the reporting requirement for at least the 2012 calendar year. Such employers will be required to report for future years if/when additional regulations are issued.
4. The cost of an employer-sponsored health plan is the amount to be reported. This includes any amounts contributed by the employer and the employee.
5. Amounts attributable to an HSA are not reported. The amount for the underlying QHDHP are reported.
6. The amount of any salary reduction election to a medical reimbursement FSA is not included. Any employer contribution to the medical FSA is included.
7. Plans that provide benefits generally limited to dental, vision, specified illness/disease or fixed indemnity reimbursements (typically hospital indemnity plans) are not included. This is the case even if the dental and vision are packaged with the medical if they are provided under a separate plan (i.e., not an integral part of the medical plan).
8. Fully insured plans can rely on the premium charged by the carrier in determining the amount to be reported.
9. Self-funded plans can rely on the COBRA costs they calculate at the beginning of each plan year, including any amounts the employer may contribute to the COBRA coverage.
10. For employees that are not enrolled in a health plan for the entire tax year an employer may use any reasonable, consistent method for calculating the pro-rata amount to be reported.

This is obviously not an exhaustive list of the regulations, nor does it constitute tax advice. Employers and employees should consult their own tax consultants for details regarding their specific situation.