End-of-Year Action Items
As 2016 comes to a close, it’s the time of year to review those end-of-the-year benefit plan “action items” that may require your attention:
W-2 Reporting Requirement: Include the full cost of health insurance on employee W-2’s that will be issued in 2017 for tax year 2016. This applies to employers who issued 250 or more W-2’s for the tax year 2015.
Action: Make sure all systems are set to report this information on W-2’s.
Domestic Partner Coverage May Result in Imputed Income for Employees: If medical, dental or other health benefits are provided to domestic partners, and if the domestic partner is not the employee’s dependent for benefit plan purposes, the portion of the company’s contribution attributable to the partner’s coverage is taxable income to the employee. In addition, the employee is not allowed to pay his/her share of the premiums attributable to such coverage pre-tax. If such employee contributions have been run through the company’s Section 125 Plan, be sure to impute income to the employee correctly. Note that these requirements do not apply to married couples.
Action: Add income to W-2 where appropriate and review section 125 plan to make sure employee contributions are allocated correctly.
Long Term Disability Imputed Income: If your LTD plan has a “gross up” or “tax choice” feature that would result in benefits being tax free to the recipient, the plan premiums are considered taxable income to the employee.
Action: Impute income by adding cost of LTD premium to W-2’s.
Employer-Paid Life Insurance Amounts in Excess of $50,000: The coverage over $50,000 results in imputed income to participants. Cost is determined by IRS Table I rates.
Action: Impute income on life insurance amounts over $50,000 by adding value of insurance protection to W-2’s.
Report New Salary Data to Insurance Carriers: Employers often update earnings for benefit plan purposes once a year, often in January, to reflect prior year W-2 income to ensure proper billing and claim processing.
Action: Update earnings for life and disability plans as appropriate.
Medicare: The “Centers for Medicare Services” (CMS) requires health plans to report information regarding “active covered individuals” age 45 and over. This helps CMS determine whether Medicare is a primary or secondary payer for health plan claims. Therefore, your health insurer may ask your employees for social security numbers and other information regarding themselves or their dependents. This is a legitimate request and employees should furnish the information.
Action: Informational only, no action required on your part.
ACA Reporting: By now, every employer with more than 50 “Full Time Equivalent” employees should be in the final stages of planning for preparation and distribution of 1095 C forms to their employees and to the IRS.
Action: Continue working with your payroll company or other vendor to finalize the reporting process.
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Please Note: The information and materials herein are provided for general information purposes only and are not intended to constitute legal or other advice or opinions on any specific matters and are not intended to replace the advice of a qualified attorney, plan provider or other professional advisor. This information has been taken from sources which we believe to be reliable, but there is no guarantee as to its accuracy. In accordance with IRS Circular 230, this communication is not intended or written to be used, and cannot be used as or considered a ‘covered opinion’ or other written tax advice and should not be relied upon for any purpose other than its intended purpose.
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