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Health & Fitness

W-2 Reminder & Health Care Reform

Health care reform provides that employers must report the aggregate cost of employer-sponsored coverage on each employee’s annual Form W-2, beginning for the 2012 calendar year (reported on the January 2013 W-2). The amount reported is not taxable. Below you will find a summary of the guidance issued regarding W-2 reporting.

Who Must Report?

All employers that provide employer-sponsored coverage during a calendar year, including federal, state and local government entities, churches, and other religious organizations must report the cost of coverage, except:

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• small employers (employers that were required to filefewer than 250 Forms W-2 for the preceding calendar year);
• employers that contribute to a multiemployer plan (i.e., acollectively bargained plan governed by a board);
• Federally-recognized Indian tribal governments;
• tribally chartered corporations wholly-owned by afederally recognized Indian tribal government;
• self-insured plans that are not subject to COBRA (e.g., aself-insured church plan); and
• governmental plans maintained primarily for members ofthe military and their families.

An employer must issue a Form W-2 including the aggregate cost to any individual to whom the employer is otherwise required to issue a Form W-2 and not to a former employee receiving no compensation.

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What is the Aggregate Cost of Employer-Sponsored Coverage?

The aggregate cost generally includes both the portion of the cost paid by the employer and the portion of the cost paid by the employee, regardless of whether the employee paid for any cost through pre-tax or after-tax contributions. It is not reduced by any amount of the cost of coverage included in the employee’s gross income and is determined by tier (e.g., for single-only coverage or for family coverage), as applicable to the employee. If an employee commences, changes or terminates coverage during the year, the reportable cost for the employee for the year must take into account the change in coverage.

What is Employer-Sponsored Coverage?

Employer-sponsored coverage means coverage under any group health plan, including a major medical plan and onsite clinic, but not:
• a dental plan or a vision plan under a separate policy, certificate, or contract of insurance or where such plan is not integrated into a group health plan;
• a health reimbursement arrangement ("HRA");
• coverage for long-term care,
• accident coverage;
• disability coverage;
• coverage only for a specified disease or illness or hospital indemnity or other fixed indemnity insurance, the payment for which is not excludable from gross income and for which a business deduction under § 162(l) is not allowable;
• the amount contributed to any Archer MSA;
• the amount contributed to any health savings account ("HSA");
• the amount of any salary reduction election to a health FSA; and
• when a health FSA has employer flex credits, if the amount of salary reduction (for all qualified benefits) elected by an employee equals or exceeds the amount of the health FSA for the plan year, the amount of the health FSA.

Coverage provided under an EAP, wellness program, or onsite medical clinic is only included in the W-2 reporting to the extent that the coverage is a group health plan. (EAPs providing medical benefits (e.g., counseling by a trained professional) will be subject to the W-2 reporting requirement). There is an exception to the reporting where an employer does not does not charge a COBRA premium for these coverages.

If coverage contains both reportable and non-reportable benefits, an employer may use any reasonable allocation method to determine the cost of the portion of the program providing applicable employer-sponsored coverage.


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