The following is a summary of some of the provisions that affect employers with more than 50 employees, some starting in 2012:
- Employers are required to report the value of group health plan benefits on the employee’s annual Form W-2 beginning with the 2012 taxable year (the W-2 is due in January 2013).
- Employers with material modifications to their group health plans are required to coordinate with their health provider vendors to redraft the Summary of Benefits and Coverage (SBC), which in turn must be distributed to all plan participants 60 days in advance of the effective date of the modification.
- Employers with more than 200 full-time employees that offer at least one health plan benefit option must be ready to automatically enroll all new employees in a benefit option and continue the enrollment of current employees in a health benefit plan offered by the employer. The effective date on this is based on when federal regulations are issued.
- Unless grandfathered, an employer’s group health plans must now establish internal and external review procedures that comply with PPACA. Claimants can appeal certain types of claims to an independent review organization (IRO). An IRO is an entity that performs independent external reviews of adverse benefit determinations and final internal adverse benefit determinations under state or federal external review procedures. Group health plans are required to contract with at least three IROs by July 1, 2012; however, many insurers and/or third-party administrators are offering this service to their customers.
- For employer’s with plan years beginning after September 30, 2012, through 2013, self-insured health plans and fully insured health plans (through the insurer) will be assessed an annual fee of $1 times the average number of covered lives covered under the plan to fund research regarding patient centered outcomes for medical treatment. The annual fee will increase to $2 thereafter and will be indexed for inflation starting in 2014. Employers should budget for these fees.
- Employers should know whether insurers meet the medical loss ratio (MLR) standards. If not, the insurer must provide an annual rebate to the employer’s group health plan. The existing fiduciary duty rules under ERISA apply to the treatment of insurer rebates. Employers should review DOL Technical Release 2011-4 for guidance.
- Employees will only be allowed $2,500 annually for health FSA deferrals starting on January 1, 2013 (currently there is no such limit).
- Employers should plan for the fact that the current 7.5 percent of adjusted gross income (AGI) floor on income-tax deductions for health care expenses is raised to 10 percent of AGI effective January 1, 2013; however, the new floor is waived during 2013, 2014, 2015 and 2016 for individuals who turn age 65 before the close of those years.
- Employers should plan for the elimination of the deduction for the portion of health care expenses that are reimbursed to the employer through the Medicare Part D subsidy program (effective January 1, 2013).
- Employer group health plans must comply with “administrative simplification” rules for electronic exchange health information and electronic fund transfers, and file a certification with the federal government that the plans are in compliance. The employer must also ensure that service providers also comply with the transaction and certification requirements. The penalty for non-compliance is $1.00 per covered life per day of non-compliance up to a maximum of $20.00 per covered life per year, but a double penalty applies in the case of any employer misrepresentation. These penalties also apply to grandfathered plans. Systems must be effective starting January 1, 2013, and employers must certify compliance by December 31, 2013.
- Employers are required to collect 0.9 percent for the employee’s share of the FICA Medicare tax for wages/earnings over $200,000 ($250,000 for married couples filing jointly); i.e., a combined 2.35 percent on wages over $200,000 ($250,000 for joint filers). The law does not increase the employer’s share of FICA Medicare tax (effective for tax years beginning January 1, 2013).
- Employers must provide notice to employees of the upcoming existence of state insurance exchanges, which are to be established by all the states in 2014. Notice must be in the form specified in upcoming DOL guidance (effective March 1, 2013 or such later date as set forth in future DOL guidance).
For more information about this or other tax and business issues, email us or call 800-282-2440