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CCH® BENEFITS — 04/07/10

Health Reform 2010: Inclusion Of Employer-Sponsored Health Coverage On W-2

from Spencer’s Benefits Reports: For the next few weeks, Spencer’s Benefits Reports will highlight specific provisions in the new health reform law that affect employer-sponsored plans.

Sec. 9002 of the Affordable Care Act concerns the inclusion of the cost of employer-sponsored health coverage on W-2 forms:

Starting in 2011, employers are required to disclose on the employee’s Form W-2 the aggregate cost of “applicable employer-sponsored coverage” provided to employees annually. Regardless of whether the employee or employer pays for the coverage, the aggregate cost of the coverage reported is determined under rules similar to those used to determine the applicable premiums for purposes of COBRA continuation coverage.

Coverage is treated as applicable employer-sponsored coverage regardless of whether the employer or employee pays for the coverage. Applicable employer-sponsored coverage does not include coverage for long-term care, accidents, or disability income insurance. Nor does it include coverage that applies to only a specified disease or illness, hospital indemnity, or other fixed indemnity insurance, the payment for which is not excludable from gross income and deductible under Code Sec. 162(l).

Applicable employer-sponsored coverage includes coverage under any group health plan established and maintained by the U.S. government, the government of any state or its political subdivision, or by any agency or instrumentality of such government. In the case of self-employed individuals, coverage under any group health plan providing health insurance coverage will be treated as employer-sponsored coverage if a deduction is allowable for the health coverage under IRC Sec. 162(l).

Employer-sponsored coverage does not include any salary reduction contributions to a flexible spending arrangement (FSA) under a cafeteria plan or contributions to an Archer medical savings account (MSA) or health savings account (HSA) of the employee or the employee’s spouse.

Note that a 40% excise tax will be imposed on health coverage providers starting in 2018 to the extent that the aggregate value of employer-sponsored health coverage for an employee exceeds $10,200 for individuals, and $27,500 for families. In part, the inclusion of health costs on the W-2 will be used to determine this tax on so-called “Cadillac” health plans.

This provision only requires disclosure of the aggregate cost of employer-sponsored health insurance coverage by the employer. It does not require a specific breakdown of the various types of medical coverage. For example, if an employee enrolls in employer-sponsored health insurance coverage under a medical plan, a dental plan, and a vision plan, the employer must report the total cost of the combination of all of these health related insurance policies.

Effective date. The provision applies to tax years beginning after Dec. 31, 2010.

CCH Law, Explanation And Analysis Of Health Reform Act Available

CCH's Law, Explanation And Analysis of the Patient Protection and Affordable Care Act of 2010 provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation. A hard-copy version of the book is available for $149.

For more information or to order the hard-copy version of the book, please call (800) 248-3248 or visit http://hr.cch.com/Products/ProductID-7127.asp. Discounts are available for multiple copies.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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