Requirement to Provide “Summary of Benefits and Coverage”
Beginning in 2012, health insurance plans (fully insured products) and health insurance sponsors (self-insured products) must create an easy-to-read, plain language summary of benefits and coverage (SBC) for each enrollee. If an employer is fully insured, the plan must create the SBC and the employer must distribute the SBC to employees. If an employer is self-insured, the business or third-party adminstrator must create and distribute the SBC to employees.
In 2013, Section 9002 of the healthcare law will require employers to calculate and report the aggregate cost of employer-sponsored insurance coverage on employees' Form W-2s for their 2012 benefits. Previously, there was no requirement that the employer report the total value of employer-sponsored insurance coverage on Form W-2. Healthcare benefits continue to be a tax-free benefit; the new reporting requirement is simply for information purposes.
Reportable employer-sponsored costs include:
- Medical plans
- Prescription drug plans
- Health reimbursement accounts (HRAs)
- On-site medical clinics
- Amounts contributed by the employer to a health savings account (HSA) or medical savings account (MSA)
- Medicare supplemental coverage
- Employee assistance programs
- Dental and vision plans unless they are stand-alone plans
Flexible spending accounts, long-term care coverage, workers’ compensation insurance, coverage only for accidents, and specific disease or hospital/fixed indemnity plans are excluded from the reporting requirement. This requirement was scheduled to begin in 2011, but was delayed until 2013. Businesses filing fewer than 250 W-2 Forms have temporary relief from this requirement until the IRS releases further guidance or regulations.
Paperwork Reporting Requirements
In 2014, Section 1514 of the law will require any "offering employer" and "non-offering large employers" to report certain information to both the IRS and their full-time employees.
- The information required to be reported includes: (1) name, address and employer identification number of the employer; (2) certification as to whether the employer offers its full-time employees and their dependents the opportunity to enroll in “minimum essential coverage” under an eligible employer-sponsored plan; (3) the number of full-time employees of the employer for each month during the calendar year; (4) name, address and taxpayer identification number of each full-time employee employed by the employer during the calendar year and the number of months, if any, during which the employee (and any dependents) was covered under a plan sponsored by the employer during the calendar year; and (5) other information as the government may require.
- Employers who offer the opportunity to enroll in “minimum essential coverage” must also report: (1) in the case of an applicable large employer, the length of any waiting period with respect to such coverage; (2) the months during the calendar year during which the coverage was available; (3) the monthly premium for the lowest-cost option in each of the enrollment categories under the plan; (4) the employer’s share of the total allowed costs of benefits under the plan; and (5), in the case of an offering employer, the option for which the employer pays the largest portion of the cost of the plan and the portion of the cost paid by the employer in each of the enrollment categories under each option.
- Employers are required to report to each full-time employee the above information required to be reported with respect to that employee, along with the name, address and contact information of the reporting employer, on or before January 31 of the year following the calendar year for which the information is required to be reported to the IRS.
Requirement of Written Notice for Individual Health Insurance Exchange Availability
In 2014, the law will require employers to provide a written notice to employees on the availability of individual health insurance exchanges, including a description of services and methods of participation. Employers are also required to inform employees that they may be eligible for a premium tax credit and a subsidy within an individual health insurance exchange if the plan the employer provides covers less than 60% of total allowed health costs. Employers must notify employees that they would lose employer contributions for health coverage if that employee chose to purchase coverage through an individual health insurance exchange.
To access the timeline for overall implementation of the healthcare law, please visit our PPACA Timeline
Joint Committee on Taxation, Technical Explanation of the Revenue Provisions of the “Reconciliation Act of 2010,” as amended, in combination with the “Patient Protection and Affordable Care Act”
(JCX-18-10), March 21, 2010.