Health Care Reform Employer Compliance Obligations 2012

Following are compliance obligations under the Patient Protection and Affordable Care Act (" Health Care Reform Act") forthcoming in 2012.

Summary of Benefits and Coverage
Employer health plans (and insurers for insured plans) are required to prepare and distribute a document called a Summary of Benefits and Coverage ("SBC"). The purpose is to assist individuals in understanding and comparing their health coverage options. The SBC is in addition to, and not in lieu of, the Summary Plan Description (SPD) that employers must already provide to participants.

SBCs are subject to content and formatting rules and must be provided in a culturally and linguistically appropriate manner. Regulations recently issued by the governing federal agencies include SBC templates (along with instructions, sample language and uniform glossary).

The requirement to provide an SBC applies for disclosures to participants and beneficiaries who enroll or re-enroll in group health coverage through an open enrollment period beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. For disclosures to participants and beneficiaries who enroll in group health plan coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), the requirement applies beginning on the first day of the first plan year that begins on or after September 23, 2012.

Self-insured employers should consult with their third party administrators to determine whether they will be preparing, or will assist in preparation of, SBCs for the plans.

Comparative Effectiveness Fees
These are fees imposed on health insurance issuers and self-insured health plans to fund research. The purpose of the research is to determine the effectiveness of medical treatments, services and items. Some plans such as certain dental, vision and health flexible spending accounts are exempt.

Fees will begin to be imposed for policy and plan years "ending after" September 30, 2012. The fee is not imposed for policy or plan years "ending after" September 30, 2019. For calendar year plans, this means the fee will apply for years 2012 through 2018. The fees will be treated as a tax and are imposed on the insurer for insured plans and the plan sponsor for self-insured plans. The fee imposed is equal to $2 ($1 in the case of plan years ending before October 1, 2013) times the average number of lives covered under the plan or policy for the year.

The IRS asked for public comments and plans to publish guidance on methods for determining the average number of lives covered by a plan or policy and other logistics. We will update you as further guidance is issued.

W-2 Reporting of Health Coverage Value
Required W-2 reporting of the value of certain health benefits begins with the W-2s for tax year 2012 (due in 2013). The IRS issued guidance on this requirement. Until further guidance is issued, an employer is not subject to the reporting requirement for any calendar year if the employer was required to file fewer than 250 W-2 Forms for the preceding calendar year. Special rules apply in determining whether fewer than 250 W-2s have to be filed.

Cap on Health Flexible Spending Account Salary Reductions
Effective January 1, 2013, the annual limit on salary reductions to a health flexible spending account program is $2,500 per year. The limit is inflation adjusted annually. Employers will need to amend their plans and employee communication materials this year to accommodate this change.