EServing
UCLID MANAGERS
the independent agent since 1976
®
A Legislative Review Service by Euclid Managers
June 2011
EUCLID MANAGERS®
has served the independent agent
since 1976, offering a portfolio
of group health, professional
liability, individual life, health,
annuity and long-term
care products.
We proudly represent many
fine carriers including
Group Products:
UnitedHealthcare of Illinois
Delta Dental of Illinois
MetLife
Individual Products:
American General Life Companies
AXA/Equitable
Banner Life
Genworth Financial Insurance Co.
Guarantee Trust Life
HumanaOne
John Hancock Life
Lincoln National Life
MetLife
Prudential Financial
Transamerica
West Coast Life
…and many more!
Contact Information
Reflections
Health Reform – W-2s; Counting Employees
and Other Developments
Health reform changes and obligations continue to trickle out causing compliance
concerns – or headaches – for insurers, employers and brokers. This issue of
Reflections provides an overview of several recent changes or compliance issues
resulting from federal health reform.
W-2 Reporting
One of the provisions of health reform requires that employers include the value of
an employee’s health coverage on their annual Form W-2. The Form W-2 is a tax
document used to report taxable wages and payroll deductions. Despite numerous
continued on page 2
A letter from Karen Knippen
I always thought counting employees was pretty simple. That’s why carriers
ask for payroll records. If you get a paycheck – you’re an employee!
And, it always seemed pretty straightforward how to determine if someone
was full-time or not. But, health reform requires that we revisit what we
thought we knew.
Hmm, that makes me think. Isn’t it time you revisited the quality carriers
and products that Euclid Managers offers? Our goal is to provide you with
some of the best products and THE BEST service for you and your clients.
Sincerely yours,
234 Spring Lake Drive
Itasca, Illinois 60143
Phone: (630) 238-1900
Outside Chicagoland:
(800) 345-7868
Fax: (630) 773-8790
Visit us at:
www.euclidmanagers.com
Karen Knippen, RHU, REBC, CLTC
EUCLID MANAGERS® has been serving the independent agent since 1976 with a portfolio of group health, professional
liability and individual life and health, annuity and long-term care products. We proudly represent UnitedHealthcare,
Delta Dental of Illinois, MetLife and HumanaOne. We encourage your feedback and suggestions. Please call your
EUCLID MANAGERS® Marketing Representative or Marcy Graefen at (630) 238-2915 for more information. Outside
Chicagoland, call (800) 345-7868. Website: www.euclidmanagers.com
assurances from the Internal Revenue Service and other
federal regulators that using a tax document is a convenience
and not intended to be precursor to taxing health benefits,
many people remain concerned.
Initially, this requirement was to be effective for the 2011
tax year. Regulators pushed back the date to accommodate
the need to make computer system changes to include this
information on the form. As such, guidance now allows that
reporting for 2011 is voluntary. Subsequent years are
mandatory with one significant exception. For 2012 Forms
W-2 and until further guidance, an employer “is not subject
to the reporting requirement for any calendar year if the
employer was required to file fewer than 250 Forms W-2
for the preceding calendar year." This is based on the fact
that employers with fewer than 250 Forms W-2 are exempt
from filing such returns electronically. Whether the IRS will
allow this exception to continue past 2012 is unknown at
this time.
Similarly, self-insured employers that are not subject to any
federal continuation of coverage provisions (COBRA) are not
required to report this information.
Employers are required to report the “aggregate cost of
applicable employer-sponsored coverage." This is defined
as the “total cost of coverage of all applicable employersponsored coverage." Applicable employer sponsored
coverage is coverage “under any group health plan made
available to the employee by an employer that is excludable
from the employee’s gross income under section 106
(Internal Revenue Code)."
This excludes coverage for the following:
• Long term care insurance
• Coverage for on-site medical clinics
• Separate policies for dental and vision.
The reportable cost is the cost paid by the employer and the
portion paid by the employee. Whether premiums are paid
pre-tax or not is irrelevant for these reporting purposes.
The cost should include the additional cost that may be
attributable for covered dependents.
Amounts contributed to an Archer MSA, a Health Savings
Account (HSA), a health reimbursement arrangement (HRA)
or salary reduction for a Section 125 flexible spending
account are not included in the cost of coverage. But, if the
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Reflections
amount of the health FSA for the plan year exceeds the
salary reduction amount, the excess amount must be reported.
Presumably, this scenario can occur if the employer makes
a contribution to the health FSA or provides credits in a
cafeteria plan. An amount that an employer contributes to
a multi-employer plan is not required to be included in the
cost of coverage.
An employer may use either the premium charged or the
COBRA applicable premium method to calculate the cost of
coverage.
Employers may wish to check with their financial and
accounting professionals for added interpretations of the
IRS guidance.
Determining Full-Time Employee Status
The Department of the Treasury and the IRS issued notice
2011-36, a request for comments on May 3, 2011 regarding
the employers’ “shared responsibility" and the definition of
"full-time" employee. Comments are due by June 17, 2011.
Federal health reform includes a requirement that employers
with 50 or more full-time employees that do not offer
affordable health coverage to their full-time employees may
be required to make a “shared responsibility" payment.
Small firms that have fewer than 50 full-time employees
are exempt from this provision which takes effect in 2014.
Notice 2011-36, requests comments on possible approaches
employers could use to determine who is a full-time
employee. The notice does not constitute guidance. It does,
however, give insight into the thinking of regulators as they
fine-tune regulations yet to be issued. The notice also invites
feedback on the interpretation of the 90-day limitation on
waiting periods in group health plans that is part of the ACA.
As a refresher, ACA, beginning in 2014, includes a penalty
of $2,000 per year for each full-time employee not offered
coverage by an employer. The law defines full-time employees
as one who works an average of at least 30 hours per week
in a month. This provision applies to large employers,
defined as those who employed an average of at least 50
full-time employees on business days during the preceding
calendar year. Employers must count full-time equivalent
employees to determine whether they meet the threshold of
large employer.
Employer is generally defined as “the entity that is the
employer of an employee under the common-law test."
This includes controlled group and affiliated service groups
as a part of the employer.
Because some employers may have difficulty tracking
employees on a monthly basis, the notice discusses the
concept of a “look-back/stability" approach.
The notice contemplates that 130 hours of service in a
calendar month would be treated as the monthly equivalent
of 30 hours of service per week. Hours of service include
hours worked, vacation, holidays and sick time. It also
includes jury duty, military duty or leave of absence.
Large employer status is determined based upon the sum
of full-time employees and full-time equivalents (FTEs). A
full-time employee is “an employee (including a seasonal
employee) who is employed, on average, at least 30 hours
of service per week." Alternatively, if the rules are issued as
contemplated, an employee would be one with at least 130
hours of service in the calendar month.
All employees who are not full-time employees are included
in calculating the number of FTEs. The number of FTEs is
calculated in the following manner:
(1) Calculate the aggregate number of hours of service
(but not more than 120 hours of service for any employee)
for all employees who were not full-time employees for
that month.
(2) Divide the total hours of service in step (1) by 120.
This is the number of FTEs for the calendar month.
The calculation of the number of full-time employees is
more straightforward. An employer uses the full-time
employees in the preceding calendar year to consider
whether the threshold is met in the current calendar year.
(3) Add the number of full-time employees and FTEs
calculated in steps (1) and (2) for each of the 12 months in
the preceding calendar year.
(4) Add up the 12 monthly numbers in step (3) and
divide the sum by 12. This is the average number of the
employer’s full-time employees for the preceding calendar
year.
If the resulting calculations exceed 50, then the employer
can determine if the seasonal employee exception applies.
The seasonal employee exemption is not available if the
number of an employer’s full-time employees (including
seasonal employees) exceeds 50 employees for more than
120 days during the calendar year.
The notice recognizes that determining full-time employee
status on a monthly basis may be impractical for some
employers and for the State Exchanges contemplated by
ACA. As such, the regulators are considering a look-back/
stability period safe harbor. This safe harbor would allow an
employer to look back for three to 12 consecutive months
to determine if an employee met the 30 hours per week
measure during the period. If so, the employee would be
consider full-time during a subsequent “stability" period.
This stability period would be at least six consecutive
months, but no shorter than the measurement period.
New employees or employees who move to full-time
status during the year would have a limited application
of the safe harbor.
The notice also asks for comments regarding the 90-day
waiting period limitation. The ACA states that a group
health plan shall “not apply any waiting period that
exceeds 90 days." Comments are invited regarding
which employees are subject to the limitation, when a
waiting period may apply and how the 90-day limit
should be calculated.
This calculation follows:
(1) Calculate the number of full-time employees
(including seasonal employees) for each calendar month in
the preceding calendar year.
(2) Calculate the number of FTEs (including seasonal
employees) for each calendar month in the preceding
calendar year.
Reflections
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EServing
UCLID MANAGERS
the independent agent since 1976
®
A Legislative Review Service by Euclid Managers
June 2011
Reflections
A service publication for brokers from
Euclid Managers®, proudly representing
UnitedHealthcare of Illinois, Delta Dental of Illinois,
MetLife and HumanaOne.
EServing
UCLID MANAGERS
the independent agent since 1976
®
Visit us online www.euclidmanagers.com.
Legislative Review is published by Euclid Managers®, 234 Spring Lake Drive., Itasca, IL 60143. For more information, contact your Marketing Representative or Marcy Graefen
at (630) 238-2915 or fax your request to (630) 773-8790. Outside Chicagoland: (800) 345-7868, Fax (877) 444-2250. © Permission to quote with credit to source.
Health Reform – W-2s; Counting Employees
and Other Developments
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EServing
UCLID MANAGERS
the independent agent since 1976
®