Employee Notices Among Many Obligations for Employers
The Federal Patient Protection and Affordable Care Act (PPACA) covering healthcare has already started to affect some employers in Oregon.
As of January 1, 2013, employers that issued 250 or more W-2 wage and tax statements in the prior tax year now have to report the cost of healthcare coverage on their employees' W-2 forms. This means that employers who issued 250 W-2 forms in 2011 must include this additional information on the 2012 forms that are due by the end of January 2013. This reporting is optional for employers that issued fewer than 250 W-2 forms in the prior tax year.
Income from self-employment and wages of single individuals in excess of $200,000 annually will be subject to an additional tax of 0.9 percent. The threshold amount is $250,000 for a married couple filing jointly (threshold applies to joint compensation of the two spouses), or $125,000 for a married person filing separately. Further, an additional Medicare tax of 3.8 percent will apply to unearned income, specifically the lesser of net investment income or the amount by which adjusted gross income exceeds $200,000 ($250,000 for a married couple filing jointly; $125,000 for a married person filing separately.)
For plan year 2013, the PPACA imposes a $2,500 cap on an employee’s salary reduction for contributions to a health flexible spending arrangement (FSA). The limit generally does not apply to employer non-elective contributions to a health FSA or HRA. Unused salary reduction contributions that are carried over for a grace period of not more than two-and-a-half months in a subsequent year do not apply against the $2,500 limit for the subsequent year.
Employers will need to communicate the limit when employees make salary reduction elections in 2013, and employers that carry forward employees’ salary reduction elections from year to year will have to decide how to treat those elections that exceed the new $2,500 cap.
Health Insurance Exchange
The federal government has delayed the March 1, 2013 mandate that requires employers to notify employees about their health care coverage options, including information regarding the existence of a health insurance exchange, it’s services, and contact information.
But the guidelines for these notices have not been established by the Department of Health and Human Services. So, the following extension was released by the Department of Labor:
“The Department of Labor has concluded that the notice requirement under FLSA section 18B will not take effect on March 1, 2013 for several reasons. First, this notice should be coordinated with HHS's educational efforts and Internal Revenue Service (IRS) guidance on minimum value. Second, we are committed to a smooth implementation process including providing employers with sufficient time to comply and selecting an applicability date that ensures that employees receive the information at a meaningful time. The Department of Labor expects that the timing for distribution of notices will be the late summer or fall of 2013, which will coordinate with the open enrollment period for Exchanges.”
When the guidelines are developed, the information must include the following: if the employer’s plan pays less than 60 percent of the covered benefits, they need to also provide a statement that the employee may be eligible for premium tax credits.
Employers should warn employees who purchase coverage through the exchange that the employee might lose the employer contribution toward the cost of health coverage, including the tax favorable treatment of the employer’s contribution, if the employee purchases coverage through an exchange.
There are many changes coming, and even more questions. Check ORLA’s website for more information and updates, as well as webinars that will be offered on this important subject. Visit OregonRLA.org to learn more. | BILL PERRY
BILL PERRY – BPerry@OregonRLA.org