A checklist can be very valuable during your payroll process, especially at month, quarter and year end. However, a PPACA (Patient Protection and Affordable Care Act) list should also be handy for your company. Compliance has become very tricky lately with all the changes in payroll over the past few years and currently with the PPACA constitutionality ruling adding more items to look out for this year:2012
Calculate the value of the non-taxable healthcare coverage (if your company size is over 250 employees). This information will need to be recorded on form W2 in Box 12 using code DD. Please also refer to the list of applicable employer-sponsored coverage that does or does not have to be reported on form W-2.
If you conduct your open enrollment on or after September 23, 2012 you will now need to include a Summary of Benefits and Coverage with explanation of the plan. This includes having an Updated Summary Plan Description (SPD) to reflect any changes that are associated with the Patient Protection and Affordable Care Act (PPACA).
If your company is eligible to receive the Medical Loss Ratio Rebate (The 80/20 Rule described in this newsletter) shortly after August 1, 2012 you will need to properly plan for future premium reduction or distribution of rebate to the employees covered under the plan.
All Employers must comply with the additional Medicare tax withholding obligation for high income earners effective January 1, 2013. All employers must withhold the Medicare tax at a rate of 1.45% on the first $200,000 of wages. When an employee exceeds this level of income the additional .9% will now change the percentage to 2.35% on the employee share only. The employer is not required to match the withholding share of 0.9% on employees exceeding $200,000 of income each year. The additional Medicare tax will be reported with the other Medicare tax withholding in Box 6 of the W2. An individual is liable for the tax on all wages and other compensation or self employment income. The employee owes the extra 0.9% on compensation over $200,000 beginning the pay period the $200,000 threshold is met.
A recent ruling by the District of Columbia Circuit Court of Appeals has temporarily enjoined the National Labor Relations Board which has now stated that it is NOT mandatory to post the “Employee Rights” poster. The rule for mandatory posting requirements was supposed to have taken effect on April 30, 2012. The posting requirement does not have a new deadline at this time due to pending legal issues.
As of August 1st you may have received a rebate check in the mail from your group health insurer as a result of health care reform. Under the Affordable Care Act, health insurance companies are required to disclose the actual amount of premium dollars collected and used toward healthcare claims, administration and marketing to improve health care quality. This is called the 80/20 Rule. If the health insurer spends less than 80% of the premiums collected it must rebate the excess. For larger groups who have 50 employees or more, the insurer must spend 85% of the premium. Health and Human Services Secretary, Kathleen Sebelius said in a statement “The 80/20 rule helps ensure consumers get fair value for their health care dollar”. This new law provides more transparency into insurer’s costs and payments relative to premium collection.
Did your company receive a rebate? If so, as an employer you have two ways to reimburse your employees. Optionally you can refund any proportional amount of the rebate directly to the employee covered under the health plan or retain the rebate to reduce future premium costs. If you choose to rebate your employees through payroll, be careful how you return those dollars if your plan health deductions occurred on a pretax basis (Section 125). Rebates returned to employees under the pretax scenario should be taxed on total amount of rebate received.