End of Year Action Items 2011
December 2011
END OF YEAR ACTION ITEMS
It's that time of year again - the holidays are here and it's time to review some end of year benefit plan "action items" that may require your attention:
Long term disability imputed income: if LTD is a "gross up" or "tax choice" plan, employees recognize income to the extent of premiums paid by the company for LTD, thus paying the tax on the premium. In exchange, any benefits paid would be non-taxable under current law. Action: add cost of LTD to W-2's.
Life insurance amounts over $50,000: The coverage over $50,000 results in "imputed income" to participants. Action: impute income on life insurance amounts over $50,000 by adding value of insurance protection to W-2'S.
Domestic partner coverage may result in imputed income for employees. If medical or dental or other health benefits are is 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 may not use the company's section 125 plan to pay premiums on a pre-tax basis for the portion of his/her contribution attributable to the partner. Action: add income to W-2 where appropriate and review section 125 plan to make sure employee contributions are allocated correctly.
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.
W-2 Reporting: Employers who issue 250 or more W-2's in 2011 must report the cost of health insurance on W-2's issued in 2013 for the tax year 2012. This does not create taxable income - it is merely an information item, to be reported in Box 12 with the code DD. Employers with insured plans will report the actual premium (those sponsoring self-insured plans will report the COBRA equivalent premium). The reportable cost is the total, including employer and employee contributions and is based on the tier in which the employee participates (i.e., Single, Employee plus 1, Family, etc.). Mid-year changes (a change in coverage tier or renewal cost increase for example), must be factored into the reportable amount. Reporting should be done without regard to whether such amounts are pre-tax, post-tax or imputed as income to the employee. Employers may choose to report premium for COBRA participants or may elect not to, as long as the decision is consistent. Action: make necessary changes to payroll systems or confirm with payroll service that this information will be captured for reporting.
You may be fielding questions from some employees wondering why their insurance carrier is asking them for information about some of their family members with regard to Medicare, even though they are not old enough for Medicare. The "Centers for Medicare Services" (CMS) is requiring health plans to report information regarding "active covered individuals" aged 45 and over (previously 55 and over). This has to do with the CMS determining whether Medicare is a primary or secondary payer for health plan claims. Therefore, your health insurer may be asking 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.
If you have any questions or if we can be of any assistance, please contact a member of Summit's Health & Welfare team.
Summit Benefit Solutions
7 New England Executive Park, Suite 220
Burlington, MA 01803
Phone: 781-229-9500
As with all issues involving the interpretation or applications of laws and regulations, Employers should rely on their attorneys for authoritative advice on steps taken in light of the CMS' requirements for disclosure notices. Summit Benefit Solutionsis not authorized to practice law.
The materials created through August 2011 are when the professionals of Summit Financial were with Ogilvie Security Advisors Corp. The professionals of Summit Financial have not been with Ogilvie Security Advisors Corp. since August 31, 2011 and have no further affiliation with that organization.
