“The Affordable Care Act provides that employers are required to report the cost of employer-provided health care coverage on the Form W-2. Notice2010-69, issued fall of 2010, made this requirement optional for all employers for the 2011 Forms W-2 (generally furnished to employees in January2012). In today's guidance, the IRS provided further relief for smaller employers (those filing fewer than 250 W-2 forms) by making this requirement optional for them at least for 2012 (i.e., for 2012 Forms W-2 that generally would be furnished to employees in January 2013) and continuing this optional treatment for smaller employers until further guidance is issued.”
So what does this mean for your church?
If you have few than 250 employees, nothing… yet! While you can choose to report the aggregate cost of employer provided health coverage, the government has given you an extension for now. While you can choose to follow the instructions below if you would like to begin reporting to your employees on their W-2, but it’s not mandated yet.
If you have 250 employees or more, you are required to begin reporting the aggregate cost of group health insurance to your employees starting in 2012 (for W-2’s issued in January 2013).
Let’s cover some of the basic questions:
Who does this affect? If you offer group health insurance to your employees, this means you!
What defines “employer provided health care coverage”?
A group health plan is a plan of, or contributed to by, an employer (including a self-employed person) or employee organization to provide health care (directly or otherwise) to the employees, former employees, the employer, others associated or formerly associated with the employer in a business relationship, or their families. This also includes self insured plans.
It does not include:
- Coverage for Long Term Care
- Coverage for Specified Disease
- Coverage for Accident Insurance
- Hospital Indemnity or other fixed indemnity insurance
- Coverage under Dental and Vision if under a separate policy
- Contributions to any Archer MS
- Employee Contributions to any Health Savings Account
- Employee contributions to a Flex Spending Arrangements
Does it include Dental and Vision?
Only if Dental and Vision are integrated into a group health plan that provides the coverage. If it’s a separate plan, it does not need to be reported.
Does it include Self-Insured Group Health Plan not subject to any Federal Continuation Coverage Requirements (i.e. a church plan within the meaning of §4980B(d)(3))?
No. However, you may want to check with your church accountant to see if your church has incorporated and obtained a tax exempt status under IRS Code section 501(c)(3).
Does it include Flexible Spending Arrangement (FSA) through a 125Cafeteria Plan?
Only if you as the Employer offers optional Employer Flex Credits and the Employer Flex Credits exceed the amount the Employee elected to have withheld from his paycheck.
If your church does not have a matching flex credits program for your Flex plan, you do not need to report anything.
For example, let’s say the church offers $1000 in flex credits to each employee and the cost of the benefit is $1500.00.
- If the employee has $1500 withheld from their paycheck, you do not need to report anything (it’s a wash).
- If the employee has $2000 withheld from their paycheck, you do not need to report anything (they exceeded the cost of the benefit).
- If the employee has $1000 withheld from their paycheck, you would need to report $500 (the cost of the plan is more than what they had withheld).
What does “aggregate cost” mean?
It means the IRS wants you to add up all of the applicable employer provided health care coverage plans.
Unfortunately, the exact formula for determining the “aggregate cost” of applicable coverage hasn’t been finalized. However for group health plans you’ll want to use the amount of the premiums paid to your insurance provider.
You will need to report the information in Box 12 of the W-2 with a code of DD.
This reporting to employees is for their information only, to inform them of the cost of their health care coverage. Reporting this information will not cause their health care coverage to become taxable.
If you have more than 250 employees, you’ll need to report this information on their 2012 W-2’s, generally issued in January 2013.
If you have fewer than 250 employees, you do not need to report for 2012 but can choose to do so if desired. Check back with www.irs.gov in upcoming years to see if the reporting mandate changes for your church.
Once you’ve compiled your figures, you can easily edit each employee’s W-2 to insert the figures in Box 12 using code DD. Click the link below for more information on Payroll W-2 and End of Year Processing.
For more information, please visit www.irs.gov or contact your local church accountant or Diocese.