PPACA World: Meet New Employer Reporting Requirement IRC Section 6051(a)(14)

Employers are still waiting for the final regulations and guidance they need to meet the health plan reporting requirements created by the Patient Protection and Affordable Care Act (PPACA).

While regulators are establishing the final PPACA reporting requirements, employers and their advisors can review what has been released to date, to get an idea of how those final requirements might impact large -- and not so large -- employers. One section of PPACA that is already starting to get employers attention is PPACA Section 9002.

PPACA Section 9002 added Section 6051 (a)(14) to Internal Revenue Code (IRC) Section 6051. Secton 6051(a)(14) requires employers that offer medical benefits to report the aggregate cost of the coverage in a new box on Form W-2 -- Box 12DD.

The Section 6051(a)(14) reporting mandate applies to all employers that issue at least 250 W-2 forms annually. The first due date for Box 12DD data was Jan. 31, 2013. Employers will have to send in new Box 12DD data on Jan. 31 every year. The Box 12DD amount must include both the portion of the health benefits total paid by the employer and the portion paid by the employee, according to the implementing regulations.

Generally, an employer can use the COBRA premium to calculate the value of the coverage to be reported.

If the health plan is insured, an employer can use the premium charged by the insurer for that employee’s coverage (as applicable to the employee) as the reportable cost.

This Box 12DD total should not include contributions to health savings accounts (HSAs) or most contributions to flexible spending arrangements (FSAs). The Box 12DD total should include spending on:

- Major medical coverage.

- A health FSA for the plan year in excess of an employee’s cafeteria plan salary reduction for all qualified benefits.

- A hospital indemnity arrangement or specified illness arrangement (either insured or self-funded), paid through a pretax salary reduction program or by the employer.

- Domestic partner coverage included in gross income.

This reporting, while required, is informational only. It gives employers an opportunity to show employees how much the employees receive in benefits.

While this provision sounds easy enough to implement, it will require most employers to program the integration of this data into their W-2 reporting. That's no easy task, given that a system for generating this data for all active employees during a calendar year is not standard in most payroll or human resources information systems.

Depending on how an employer handles payroll, benefits and W-2 reporting, it might need new systems or support services to gather all of the data required in a timely fashion.

On the bright side: Regulators developed the 6051(a)(14) regulations early enough that employers and their vendors were able to get the systems needed developed and tested in time to implement the changes on time, per the law.