IRS Postpones Some W-2 Reporting Requirements Mandated by the Patient Protection and Affordable Care Act

For 2012 the IRS has granted additional transitional relief to certain small employers from the W-2 reporting requirements under the Patient Protection and Affordable Care Act (“PPACA”). PPACA added a new W-2 reporting requirement that took effect January 1, 2011 and requires covered employers to report the aggregate cost of employer-sponsored coverage under any group health plan on the W-2 Form, in Box 12. This reporting requirement applies to all employers that provide employer-sponsored coverage, including federal, state and local government entities, churches and other religious organizations, and even employers not subject to COBRA continuation coverage requirements. The new reporting requirement is for information purposes only and will not cause group health plan coverage that is otherwise excluded from gross income to become taxable.

While larger employers must begin complying with the new W-2 reporting requirements in January 2013 (on W-2 forms to be issued to employees for tax year 2012), the IRS has provided transitional relief to employers that were required to file fewer than 250 Forms W-2 for the 2011 tax year. These employers need not comply with PPACA W-2 reporting requirements until at least January 2014. See IRS Notices 2011-28 [http://www.irs.gov/pub/irs-drop/n-11-28.pdf] and 2012-9 [http://www.irs.gov/pub/irs-drop/n-12-09.pdf]. IRS Notice 2012-9 also provides transitional relief from 2012 tax year W-2 reporting of contributions to multiemployer plans, HRA’s, certain dental and vision plans, self-insured plans not subject to COBRA continuation coverage, and coverage provided under EAPs, wellness programs and on-site medical clinics. Reporting of these costs is also deferred until at least January 2014.

Employers that benefit from this 2012 transitional relief must prepare for the inevitable reporting requirements that will apply to them effective with the 2013 tax year and January 2014 W-2 Forms. If you need help determining which group health plan costs must be reported and which benefits in your benefits program are covered by this requirement, feel free to contact Patrick McGovern, Esq. or Gina Schneider, Esq. in our Labor Law Group.

IRS Reduces the Scope of its Retirement Plan Determination Letter Program

During the next three months, until May 21, 2012, the IRS will phase in changes to its determination letter program which eliminate testing for participation, coverage and nondiscrimination and make the process unavailable to certain master and prototype plans and volume submitter plans. The IRS has indicated that the changes, effective Feb. 1, 2012 (May 1, 2012, for terminating and preapproved plans) are intended to eliminate certain burdensome features of the determination letter program which are of limited utility to plan sponsors. The IRS predicts that these changes will reduce the time the IRS spends processing determination letter applications.

The determination letter program enables a plan sponsor to submit its retirement plan for review by the IRS at regular intervals and request an official determination regarding the plan’s qualified status under Section 401(a) of the Internal Revenue Code. If a favorable determination letter is issued, the plan sponsor may rely on this letter to establish that the plan, at least in form, meets the technical requirements for tax qualified status as of the date of the IRS’s favorable determination.

Revenue Procedure 2012-6 includes several changes to the determination letter program, and we believe two are key. First, the IRS eliminates a plan sponsor’s option to request a determination relating to minimum participation, coverage, and nondiscrimination requirements of the Internal Revenue Code (Schedule Q to Form 5300). Second, effective May 1, 2012, the IRS will no longer accept determination letter applications that are filed on Form 5307 (a simplified form of the application) for master or prototype plans and it will no longer accept applications on this form for volume submitter plans unless the modifications are relatively minor (i.e. the modifications are not significant enough to cause the plan to be considered an individually designed plan). If you have questions as to the effect of the new IRS program on any of your organization’s retirement plans, feel free to contact Patrick McGovern, Esq. or Gina Schneider, Esq. in our Labor Law Group.