Weyrich, Cronin & Sorra, Chartered

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1 Weyrich, Cronin & Sorra, Chartered Health Insurance Reporting Requirements Date: 9/17/2014 The Affordable Care Act (ACA) brought many changes into the law, taking effect over a period of years. Among these provisions are several that require additional reporting by s. Form W-2 Disclosure First, there is a provision that requires s to report the cost of applicable -sponsored coverage on the employee s Form W-2. Although this requirement took effect in 2013, some transition relief was granted to small s. For this purpose, a small is one that was required to file fewer than 250 Forms W-2 for the preceding calendar year. These small s are not required to report the aggregate cost of the health insurance on the current-year Forms W-2. If a business qualify for transition relief, the aggregate cost of -sponsored coverage must be reported on Form W-2 in box 12 using the code DD. In general, the amount to be reported should include both the portion paid by the and the portion paid by the employee under any group health plan. However, certain types of coverage are not required to be reported. The chart below illustrates the types of coverage to report.

2 Form W-2 Reporting of Employer-Sponsored Health Coverage Form W-2, Box 12, Code DD Do Not Coverage Type Report Report Optional Major medical Dental or vision plan not integrated into another medical or health plan Dental or vision plan which gives the choice of declining or electing and paying an additional Health Flexible Spending Arrangement (FSA) funded solely by salaryreduction amounts Health FSA value for the plan year in excess of employee s cafeteria plan salary reductions for all qualified benefits Health Reimbursement Arrangement (HRA) contributions Health Savings Arrangement (HSA) contributions ( or employee) Archer Medical Savings Account (Archer MSA) contributions ( or employee) Hospital indemnity or specified illness (insured or self-funded), paid on aftertax basis Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by Employee Assistance Plan (EAP) providing applicable sponsored On-site medical clinics providing applicable -sponsored Wellness programs providing applicable -sponsored Multi- plans

3 Domestic partner coverage included in Governmental plans providing coverage primarily for members of the military and their families Federally recognized Indian tribal government plans and plans of tribally charted corporations wholly owned by a federally recognized Indian tribal government Self-funded plans not subject to Federal Accident or disability income Long-term care Liability insurance Supplemental liability insurance Workers' compensation Automobile medical payment insurance Credit-only insurance Excess reimbursement to highly compensated individual, included in Payment/reimbursement of health insurance s for 2% shareholder-employee, included in Report Do Not Other Situations Report Employers required to file fewer than 250 Forms W-2 for the preceding calendar year (determined without application of any entity aggregation rules for related s) Forms W-2 furnished to employees who terminate before the end of a calendar year and request, in writing, a Form W-2 before the end of that year Forms W-2 provided by third-party sick-pay provider to employees of other s Optional The chart was created at the suggestion of and in collaboration with the IRS Information Reporting Program Advisory Committee (IRPAC) and is available on the IRS website. IRPAC s members are representatives of industries responsible for providing information returns, such as Form W-2, to the IRS. IRPAC works with IRS to improve the information reporting process. As with most things required by the government, there are penalties for failure to file the required health insurance disclosure. The penalty ranges from $30-$100 for each incorrect Form W-2 sent to the SSA, depending on when the failure is corrected. The maximum annual penalty that can be

4 assessed for failure to file correct Forms W-2 with the SSA is $1.5 million. For filers with average gross receipts of $5 million or less for the three most recent tax years, the maximum annual penalty is $500,000. There is a similar penalty for each incorrect Form W-2 sent to an employee.. The penalty ranges from $30-$100 for each occurrence. The maximum annual penalty that can be assessed for failure to furnish correct Forms W-2 to employees is $1.5 million. For filers with average gross receipts of $5 million or less for the three most recent tax years, the maximum annual penalty is $500,000. Employees should be aware that the amount of -sponsored health insurance reported on the Form W-2 is not taxable and is shown on the W-2 for informational purposes only. Health Care Coverage Reporting Requirements In addition to Form W-2 reporting, ACA requires every applicable large (ALE) to report certain information regarding the coverage to the IRS and the employee. For this purpose, an applicable large is an that employed an average of at least 50 full-time employees on business days during the preceding calendar year. A fulltime employee generally includes any employee who was employed on average at least 30 hours of service per week and any full-time equivalents (for example, 40 full-time employees employed 30 or more hours per week on average plus 20 employees employed 15 hours per week on average are equivalent to 50 full-time employees). The information to be reported annually discloses the following: (1) the name, address, and identification number (EIN) of the ; (2) the name and telephone number of an applicable large 's contact person; (3) the calendar year for which the information is reported; 30 (4) a certification as to whether the offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible -sponsored plan; (5) the months during the calendar year for which coverage under the plan was available; (6) each full-time employee's share of the lowest cost monthly (self-only) for coverage providing minimum value offered to that fulltime employee under an eligible -sponsored plan, by calendar month; (7) the number of full-time employees for each month during the calendar year; (8) the name, address, and taxpayer identification number (TIN) of each full-time employee during the calendar year, and the months, if any, during which the employee was covered under any the health benefits

5 plans; and (9) other information IRS requires in forms, instructions, or published guidance. The IRS is developing Form 1095-C to report this information. ALE members must file the return for each employee (Form 1095-C or another form that IRS designates, or a substitute form) and a transmittal form (Form 1094-C or another form that IRS designates, or a substitute form) with the IRS on or before February 28 (March 31 if filed electronically) of the year immediately following the calendar year for which the offer of coverage information is reported. Because transition relief applies for section 6056 reporting for 2014 the first section 6056 returns required to be filed are for the 2015 calendar year and must be filed no later than March 1, 2016 (February 28, 2016, being a Sunday), or March 31, 2016, if filed electronically. The must also furnish a statement to full-time employees on or before January 31 of the succeeding year. This means that the first employee statements must be filed for calendar year 2015 by January 31, Employers should review their reporting systems and make modifications, if necessary, to ensure that the required information can be obtained beginning in 2015.