Tucker E-Updates May 2011
In This Issue: (Click on the title)
Employer-Provided Health Coverage Informational Reporting Requirements
Prevention and Control of the 8 Heart Disease Risk Factors
PPACA Grandfathered Plan Question
Employer-Provided Health Coverage W-2 Reporting Requirements Guidance
The Patient Protection and Affordable Care Act (PPACA) requires employers to report the cost of coverage under an employer-sponsored group health plan. This was originally to start in the 2011 tax year. However, to allow employers more time to update their payroll systems, IRS Notice 2010-69, issued in October of 2010, made this requirement optional for all employers in 2011. IRS Notice 2011-28 released in March 2011 provides further relief by making this requirement optional for smaller employers in calendar-year 2012. It also provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012. Employers are not required to report the cost of health coverage on any mandatory forms to be furnished to employees before January 2013.This article provides general information for employers on reporting the value of the health insurance coverage, including information on transitional relief for 2012 and what coverage to include.
Reporting Requirement will not cause employer-provided health coverage to become taxable
There is nothing about the reporting requirement that causes or will cause excludable employer-provided health coverage to become taxable. The purpose of the reporting requirement is to provide employees useful and comparable consumer information on the cost of their health care coverage.
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"The reporting requirement will not cause employer-provided health coverage to become taxable" |
Reporting requirement is the total cost of all "applicable employer-sponsored coverage" provided to an employee
Employers are required to report the total cost of all "applicable employer-sponsored coverage" provided to an employee. "Applicable employer-sponsored coverage" is coverage under a group health plan that the employer makes available to the employee that is non-taxable to the employee (or that would be non-taxable if the coverage were employer-provided).
Certain types of coverage are excluded from the definition of applicable employer-sponsored coverage. Coverages excluded from the definition of applicable employer-sponsored coverage and not included in the amount reported are:
• Coverage for long-term care;
• Coverage for the following HIPAA "excepted benefits":
• coverage only for accident, or disability income insurance, or any combination of these coverages;
• supplemental liability insurance;
• liability insurance (including general liability insurance and automobile liability insurance);
• workers’ compensation or similar insurance;
• automobile medical payment insurance;
• credit-only insurance; and
• other similar insurance coverage specified in regulations, if the benefits for medical care are secondary or incidental to other insurance benefits.
• any coverage under a separate policy, certificate, or contract of insurance which provides benefits substantially all of which are for treatment of the mouth (including any organ or structure within the mouth) or for treatment of the eye; and
• Coverage only for a specified disease or illness and hospital indemnity or other fixed indemnity insurance, if the employee pays the premiums for the coverage on an after-tax basis.
In addition, employers should not include the following amounts in calculating an employee’s total cost of coverage:
• The amount contributed to any Archer MSA;
• The amount contributed to any Health Savings Account; and
• The amount of any salary reduction election to a flexible spending arrangement (FSA).
All Employers that provide "Applicable employer-sponsored coverage" under a group health plan are subject to the reporting requirement
Except as provided in the transition relief described, all employers that provide "applicable employer-sponsored coverage" under a group health plan are subject to the reporting requirement. This includes federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families), churches and other religious organizations, and employers that are not subject to the COBRA continuation coverage requirements, but does not include Federally recognized Indian tribal governments.
Reporting by these employers is not mandatory until the calendar year 2012 (meaning W-2s that are provided to employees in January 2013)
Additional transition relief is being provided to the following certain employers and with respect to certain types of coverage:
• Employers filing fewer than 250 Forms W-2 for the previous calendar year.
• Multiemployer plans;
• Health Reimbursement Arrangements;
• Dental and vision plans that are not integrated into another group health plan;
• Self-insured plans of employers not subject to COBRA continuation coverage or similar requirements; and
• employers furnishing Forms W-2 to employees who terminate before the end of a calendar year and request a Form W-2 before the end of that year.
The requirement for these employers above to report the value of coverage will not apply for the 2012 Forms W-2 (meaning the forms required for the calendar year 2012 that employers generally provide employees in January 2013) and will not apply for future calendar years until the IRS publishes guidance giving at least six months of advance notice of any change to the transition relief.
The amount to be reported
The amount reported should include both the portion paid by the employer and the portion paid by the employee. In the case of a health FSA, the amount reported should not include the amount of any salary reduction contributions. See Notice 2011-28 for more detail on the interim rules that apply to reporting contributions to a health FSA. The cost of these health care benefits will be reported in Box 12 of the Form W-2, with Code DD to identify the amount.
Reportable cost methods
An employer may calculate the reportable cost under a plan using any of the following:
• COBRA applicable premium method
• premium charged method
• modified COBRA premium method
• composite rate method (the same premium for different types of coverage under a plan, for example, a premium for self-only coverage versus family coverage)
The reportable cost for an employee receiving coverage under the plan is the sum of the reportable costs for each period (such as a month) during the year as determined under the method used by the employer. An employer is not required to use the same method for every plan, but must use the same method with respect to a plan for every employee receiving coverage under that plan. More detailed information on the reportable cost calculations can be found in Notice 2011-28 at: http://www.irs.gov/pub/irs-drop/n-11-28.pdf
The following are Q&A highlights that appear on the IRS website:
Q. If an employee leaves an employer during the calendar year, the employer may be required to issue a Form W-2 within 30 days if the employee requests. What amount of health benefits should be reported on the Form W-2 for employees that leave during the year?
A. Under the transition rules that apply until future guidance (see Q&A-4 above), if an employee requests the Form W-2 before the end of the calendar year, the employer is not required to report any amount of health benefits on the Form W-2. Under the interim rules, if the Form W-2 is issued after the end of the calendar year, the employer may use any reasonable method to calculate the cost of coverage, so long as that method is applied consistently.
Q. Will employers now be required to issue a Form W-2 to retirees or other former employees to whom the employer does not normally issue a Form W-2?
A. No.
Q. Where can I get more information about the employer’s requirement to report the aggregate cost of an employee’s health care benefits on the Form W-2?
A. Detailed information about the interim rules for this reporting requirement and the additional transition rules for certain employers and with respect to certain types of coverage can be found in Notice 2011-28 and the instructions for the 2011 Form W-2
Q&A from IRS website: http://www.irs.gov/newsroom/article/0,,id=237894,00.html
IRS Notice 2011-28: http://www.irs.gov/pub/irs-drop/n-11-28.pdf
If you have any questions, please call Tucker Administrators at 704-525-9666, or visit our website at www.tuckeradministrators.com
President Signs 1099 Repeal into Law
President Obama signed legislation on April 14, 2011 repealing the expanded 1099 reporting requirements included in the Patient Protection and Affordable Care Act (PPACA) and Small Business Jobs Act.
The PPACA had changed the reporting requirements so that all businesses would have to file a Form 1099 to identify vendors to whom they pay $600 or more in a year. Although the additional reporting was intended to improve tax compliance, Congress acknowledged that the administrative burden on small businesses was enough to justify repeal.
Prevention and Control of the 8 Heart Disease Risk Factors
Sponsors of group health plans know the value of keeping employees healthy. They are more productive, absent less, and are generally not as much of a financial risk for the group health plan. The following is an article from the National Heart Lung and Blood Institute that offers advice on how to prevent and control heart disease risk factors.
You can prevent and control many heart disease risk factors, such as high blood cholesterol, high blood pressure, and obesity, with lifestyle changes and medicines. Only a few risk factors, such as age, gender, and family history, can't be controlled.
To reduce your risk for heart disease and heart attack, try to control each risk factor you can. The good news is that many lifestyle changes help control several heart disease risk factors at the same time. Physical activity lowers your blood pressure, helps control diabetes and prediabetes, reduces stress, and helps control your weight.
You can make controlling heart disease risk factors a lifelong approach. Many lifestyle habits begin during childhood, so parents and families should encourage their children to make heart healthy choices, such as following a healthy diet and doing enough physical activity. Make following a healthy lifestyle a family goal.
To achieve this goal, it's important to learn about key health measures, such as weight; body mass index, or BMI; waist circumference; and your child's BMI-for-age percentile.
Be aware of you and your family members' blood pressure, blood cholesterol, and blood sugar levels. Once you know these numbers, you can work to bring them into, or keep them within, a healthy range.
Making lifestyle changes can be hard. However, making lifestyle changes as a family can make it easier for everyone to prevent or control their heart disease risk factors.
1. A healthy lifestyle includes following a healthy diet
• Eat foods low in saturated and trans fats. Saturated fats are found in some meats, dairy products, chocolate, baked goods, and deep-fried and processed foods. Trans fats are found in some fried and processed foods. Both types of fat raise your LDL, or "bad," cholesterol level.
• Eat foods high in the types of fat found in fish and olive oil. These fats are rich in omega-3 fatty acids. Omega-3 fatty acids lower your risk for heart attack, in part by helping prevent blood clots.
• Eat foods high in fiber, whole grains, fruits, and vegetables. A diet that's rich in these elements not only helps lower your LDL cholesterol level, but also provides nutrients that may help protect against heart disease.
• Research suggests that drinking small to moderate amounts of alcohol regularly also can lower your risk for heart disease. One drink a day can lower your risk by raising your HDL, or "good," cholesterol level. One drink is a glass of wine, beer, or a small amount of hard liquor. If you don't drink, this isn't a recommendation to start using alcohol. If you're pregnant, if you're planning to become pregnant, or if you have another health condition that could make alcohol use harmful, you shouldn't drink. Also, too much alcohol can cause you to gain weight and raise your blood pressure and triglyceride levels. In women, even one drink a day may raise the risk for certain types of cancer.
• Limit how much salt and sugar you consume. A low-salt diet can help you manage your blood pressure. A low-sugar diet can help you prevent weight gain and control diabetes and prediabetes.
2. Maintain a healthy weight. Following a healthy diet and being physically active can help you maintain a healthy weight. Controlling your weight helps you control heart disease risk factors. If you're overweight or obese, try to lose weight. A loss of just 5 to 10 percent of your current weight can lower your heart disease risk. To lose weight, cut back your calorie intake and do more physical activity.
• Eat smaller portions and choose lower calorie foods. Don't feel that you have to finish the entrees served at restaurants. Many restaurant portions are oversized and have too many calories for the average person.
• For overweight children or teens, it's important to slow the rate of weight gain. However, reduced-calorie diets aren't advised before you talk to a doctor.
• Teach your children how to make healthy food choices. Set a good example by following the same heart healthy diet that you ask your children to follow.
3. You don't have to be an athlete to lower your risk for heart disease. People gain some health benefits from as little as 60 minutes of moderate-intensity aerobic activity per week. If you're obese, or if you haven't been active in the past, start physical activity slowly and build up the intensity over time. The more active you are, the more you will benefit.
• For major health benefits, adults should do at least 150 minutes, which is 2 and a half hours, of moderate-intensity aerobic activity, or 75 minutes, which is 1 hour and 15 minutes, of vigorous-intensity aerobic activity each week.
• Another option is to do a combination of both. A general rule is that 2 minutes of moderate-intensity activity counts the same as 1 minute of vigorous-intensity activity.
• Children and youth should do 60 minutes or more of physical activity every day. A great way to encourage physical activity is to do it as a family. You also may want to limit your children's TV, video, and computer time to encourage them to be more active.
If you have heart disease or symptoms such as chest pain and dizziness, talk to your doctor before you start a new exercise plan. Find out how much and what kinds of physical activity are safe for you. Avoid exercising outdoors when air pollution levels are high or the temperature is very hot or cold.
For more information, see the U.S. Department of Health and Human Services' "2008 Physical Activity Guidelines for Americans," at www.health.gov/paguidelines, www.nhlbi.nih.gov and the DCI Physical Activity and Your Heart article at www.nhlbi.nih.gov/health/dci.
4. Quit smoking. Smoking can raise your risk for heart disease and heart attack and worsen other heart disease risk factors. Talk to your doctor about programs and products that can help you quit smoking. Also, try to avoid secondhand smoke.
• If you have trouble quitting smoking on your own, consider joining a support group. Many hospitals, workplaces, and community groups offer classes to help people quit smoking.
• You can help your children avoid smoking or quit smoking. Talk with them about the health effects of smoking. Teach them how to handle peer pressure to smoke.
• Teens who have parents who smoke are more likely to smoke themselves. Set a good example by not smoking or quitting smoking. Set firm rules about no tobacco use in your home.
• If you have a child who smokes, help him or her devise a plan to quit. Offer your child information and resources on how to quit. Stress the natural rewards that come with quitting, such as freedom from addiction, better fitness and sports performance, and improved appearance. Reinforce the decision to quit with praise.
For more information on how to quit smoking, see the NHLBI's "Your Guide to a Healthy Heart" on the NHLBI's Web site at www.nhlbi.nih.gov. For more information on children and smoking, see the Department of Health and Human Services' Smoking & How to Quit Web page at http://www.womenshealth.gov/quit-smoking/tools/calendar.cfm and the KidsHealth Web site at http://kidshealth.org/parent.
5. Manage stress. Learning how to manage stress, relax, and cope with problems can improve your emotional and physical health.
• Having supportive people in your life with whom you can share your feelings or concerns can help relieve stress.
• Physical activity, medicine, and relaxation therapy also can help relieve stress. You may want to consider participating in a stress management program.
6. If making lifestyle changes is hard for you, try taking things one step at a time. Learn about the benefits of lifestyle changes, and talk to your doctor.
• Figure out what's stopping you from making or sticking to your lifestyle changes. Think about how to overcome these issues. For example, if you're too tired to exercise after work, you may want to try working out before you go to work.
• Make a plan to carry out your lifestyle changes that includes specific, realistic goals. Act on your plan and work toward your goals. You may want to do so with the help of a support group or supportive friends and family.
• Reward yourself for the gains you've made. Think about what you need to do to maintain your lifestyle changes and avoid unhealthy habits.
• Don't give up if you go off your diet or exercise plan or start smoking again. Instead, find out what you need to do to get back on track so you can meet your goals. Many people find that it takes more than one try to make long-term lifestyle changes.
• Changing the eating and activity habits of children takes time. Start with small, easy steps. For example, cut out after-dinner snacks or go for an after-dinner walk instead of watching TV.
• Set a good example, and try to get your children involved in choosing a new healthy step to take each day. Making lifestyle changes a group effort will make them easier.
7. Sometimes lifestyle changes aren't enough to reduce your blood pressure, cholesterol levels, or other risk factors. Your doctor also may recommend medicines. For example, you may need medicines to:
• Lower your LDL cholesterol,
• Lower your blood pressure,
• Lower your blood sugar level, or
• Prevent blood clots and/or inflammation.
8. Take your medicines as prescribed. Don't cut back on the dosage unless your doctor tells you to. If you have side effects or other problems related to your medicines, talk to your doctor. He or she may be able to provide other options.
Tucker Administrators’ iHealth™ programs provide information and action plans similar to the information in this article on many aspects of improving and maintaining good health and healthy lifestyles. The iHealth™program provides a multi-level approach designed to maximize impact on member health and the financial position of the plan.
• It provides wellness guidelines for all employees and their dependents. These guidelines are customized for age and gender and include a recommended schedule of preventive visits, blood tests (e.g. cholesterol level) and immunizations.
• Provides age and gender specific guidelines for the prevention and early detection of the most common cancers including breast, colon, prostate and lung cancer. Important screening tests may be recommended in accordance with guidelines developed by the American Cancer Society and other experts.
• Distributes the semi-annual iHealth™ newsletter that includes seasonal health information (e.g. skin cancer prevention and the use of sunscreens in the spring edition), regular updates to the preventive guidelines, and articles specific to common problems
• Performs an analysis of medical claims and provides insureds with customized recommendations for certain wellness screening tests.
• Invites Employees and Dependents to use theiHealth™ website at www.iHealth.md
• In addition to primary prevention, insureds with certain specific diseases or risk factors will be identified by AWAC (Tucker Administrators’ claims analysis program) for intervention and management. These include:
o Diabetes
o Asthma
o Coronary Artery Disease
o Hypertension
o High Cholesterol
• Insureds with one or more listed illnesses can be identified via the Workplace Medical Risk Questionnaire for new employees and dependents.
Call us today at 704-525-9666 for more information on this program designed specifically to lower group health plan costs.
PPACA Grandfather Status Question
Q: A plan covers both retirees and active employees and is subject to the market reform requirements of the Affordable Care Act. For retirees, the employer that sponsors the plan contributes $300 per year multiplied by the individual’s years of service for the employer, capped at $10,000 per year. As the cost of coverage increases over time, how is it determined whether the employer’s contribution rate has decreased for purposes of maintaining grandfather status?
A: In this example, the employer makes contributions based on a formula. Accordingly, the plan will cease to be a grandfathered health plan if the employer decreases its contribution rate towards the cost of coverage by more than five percent below the contribution rate on March 23, 2010. If the formula does not change, the employer is not considered to have reduced its contribution rate, regardless of any increase in the total cost of coverage. However, if the dollar amount that is multiplied by years of service decreases by more than five percent (or if the $10,000 maximum employer contribution cap decreases by more than five percent), the plan will cease to be a grandfathered health plan.
If you have questions about the grandfathered status of your or your client's plan, please call us at 704-525-9666 to discuss.
About Tucker Administrators, Inc.
- Total Self-Funded Health Plan Services
- Health Risk Assessment integrated with the group health plan
- Wellness Programs integrated with the group health plan
- On-Site Physician Programs
- Regulatory Compliance Support
- Group Employee Limited Self-Funded Plans
- Group Employee Fully-Insured Health Plans
- Group Employee Ancillary Plans
- FSAs-Medical, Dependent Care and Transportation with debit cards
- Consolidated Billings Services
We can show you how to control plan costs while encouraging better health for your employees and their families. Call us at 704-525-9666, and visit our website at http://www.tuckeradministrators.com/.
