Be aware of upcoming Healthcare Reform requirements that impact FSA plans that have employer contributions.
1. 2014 Form W-2 reporting requirement for healthcare benefits: Employers that prepared 250 or more W-2s for tax year 2013 will be required to report the total cost of any group health plan coverage that was provided to an employee. This cost is not taxable – it is an informational item on the W-2. As part of the group health plan coverage, employer contributions to health FSA are required to be included in W-2 Box 12, Code DD.
For additional information about W-2 healthcare reporting requirements, please reference the IRS Overview.
2. Summary of Benefits and Coverage (SBC) Requirement: Employers are required to distribute a SBC at open enrollment for most of their group health plans. Health FSAs that are non-excepted are also required to provide a SBC. This requirement can be met by referring to the health FSA benefit in the SBC provided for your group health plan where applicable. See below for the conditions defining an excepted benefit.
The two conditions that must be met for a Health FSA to be an excepted benefit are:
- You offer other group health coverage and
- You do not offer employer contributions greater than $500 to any employee that is not a dollar for dollar match.
If you do not meet both conditions above your plan is considered a non-excepted Health FSA planwhich is subject to the SBC requirement.
For additional information about SBC requirements, including samples and instructions, please reference these links: