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Additional guidance on the Affordable Care Act's 40 percent excise tax on high-cost health plans was issued July 30 by the Internal Revenue Service in a notice that addressed employer liability for the tax and introduced possible changes in calculating the cost of health coverage.
Notice 2015-52, released July 30, also addressed age and gender adjustments to the dollar limits of the tax and the allocation of the tax among applicable employers. The excise tax on the high-cost insurance plans takes effect in 2018.
The notice supplements an initial IRS notice on the tax (Notice 2015-16), issued Feb. 23, which addressed the types of health coverage to which the tax and the coverage cost relate.
The latest notice offers a broad discussion of the costs of applicable coverage. Under tax code Section 4980I, which was added by the ACA, the provider of health-care coverage is to be liable for the excise tax. The coverage provider's identity depends on the type of coverage provided, the notice said. That means the coverage provider for an insured group health plan is the health insurance issuer, and the provider for health savings accounts and Archer medical savings accounts is the employer.
The notice said that employers required to report the aggregate cost of applicable coverage on Forms W-2, Wage and Tax Statement in Box 12, Code DD, now are allowed to reduce the amount reported on the Form W-2 by any excess reimbursement included in gross income by application of Section 105(h).
Although excess reimbursements can be excluded from the cost reported on the Form W-2, the Treasury Department and the IRS do not believe such amounts reduce the cost of applicable coverage subject to tax under Section 4980I, the notice said.
The Treasury and the IRS expect that Notice 2012-9, “Interim Guidance on Informational Reporting to Employees of the Cost of Their Group Health Insurance Coverage,” would be modified to make excess reimbursements subject to reporting under Section 6051(a)(14), and that the forms and instructions would be modified to reflect this change. Taxpayers should continue to follow Notice 2012-9 until modification of that notice is issued, the notice said.
However, the provider for all other applicable coverage is only defined in the statute as “the person that administers the plan benefits,” the notice said. Because of this, the IRS is considering different approaches to determine the identity of the person administering benefits, the notice said.
Comments on Notice 2015-52 are due by Oct. 1, the notice said. The notice is scheduled to appear Aug. 17 in Internal Revenue Bulletin 2015-33.
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