What to Expect in 2013
2013 will undoubtedly be a busy year with decisions that will impact both the marketplace and our businesses. Here’s a list of important changes coming next year as you move forward with implementation.
W2 Reporting Requirement
Employers who are issuing more than 250 Form W2s are required to report the total cost of coverage under an employer-sponsored group health plan. For purposes of this reporting requirement, “applicable employer-sponsored coverage” includes coverage under any group health plan made available to an employee by the employer, regardless of whether the employer or the employee paid the cost. The reporting is for informational purposes only, and does not change the tax treatment of the benefit to the employee.
$2,500 Health FSA Cap
For plan years beginning after 2012, PPACA imposes a $2,500 cap on an employee’s salary reduction contributions to a health FSA. The limit only applies to elective employee contributions and does not apply to employer matching or other non-elective FSA contributions. Unused salary reduction contributions that are carried over for a grace period of not more than 2.5 months in a subsequent year do not apply against the $2,500 limit for the subsequent year. Employers have until the end of 2014 to amend their plans to reflect the limit, but they must operate their plans in compliance with the limit beginning Jan. 1, 2013, for calendar year plans.
Increased Medicare Tax
In 2013, the Medicare tax rate will increase from 1.45 percent to 2.35 percent on wages over $200,000 for single filers, wages over $250,000 for joint filers, and wages over $125,000 for persons who are married filing separately. Employers are required to withhold the additional amount from the wages of these high-earning employees, but are not required to consider a spouse’s wages or whether an employee earns wages at a second job.
Medicare Retiree Drug Subsidy Tax
Employers that currently receive a federal subsidy for providing retiree prescription drug coverage (Retiree Drug Subsidy) will no longer be able to take a deduction for those retiree drug expenses with respect to that subsidy in 2013. PPACA retains the Retiree Drug Subsidy, but eliminates employers’ ability to deduct the amount of the subsidy. This change increases an employer’s income tax liability; in effect increasing the employer’s cost of providing prescription drug coverage to retirees. The amount by which an employer’s tax liability will increase depends on the total amount of the subsidy and the employer’s applicable corporate tax rate.
Health Insurance Exchange Notices
By March 1, 2013, all employers must provide notices to current employees regarding new health insurance exchanges (slated to be operational in 2014). The notice must explain the employee’s right to purchase health insurance coverage through a state exchange, the employee’s possible eligibility for government subsidies, and the employee’s possible loss of an employer subsidy, if any, if health insurance coverage is purchased through the exchange. The notice must be given to new hires after March 1, 2013. Employers should wait for the Department of Labor to issue implementation regulations for this notification requirement.
Patient-Centered Outcomes Fee
Employers offering HRA or MERP plans that had a renewal after 10/2/12 must pay a $1 fee per insured employee on Form 720 by July 31, 2013. Fee increases to $2 per insured in 2013. In addition, Health Insurance companies, for fully insured plans, must also pay these fees, however employers are not required to participate in the filing from the Insurance carrier level.
Click here (PDF) to read more details about these changes.