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As the key health care reform date of Jan. 1, 2014, looms ever nearer, employers may find themselves seeking more time to comply. But employers with eyes on the issues will find an easy year ahead. Following are the top eight health care reform issues for 2013.

W-2 reporting takes effect

With the exception of employers who filed fewer than 250 W-2 forms for 2011, employers are required to report the cost of employer-sponsored health insurance on the 2012 W-2 forms they will distribute in January 2013. While the IRS has exempted certain types of coverage from the reporting requirement, employers are required to report amounts paid by both the employer and the employee for major medical coverage (this includes dental and vision unless these coverages are part of a stand-alone plan).

Flexible spending account limits are capped at $2,500

As of Jan. 1, 2013, employees may defer only $2,500 to pay for medical expenses on a pre-tax basis. While many employers have capped flexible spending account deferrals for years, these caps were usually set at $5,000. Employers who have not yet amended their flexible spending account plans to reflect this new cap should do so before the start of 2013; they will need to correct any excessive deferral elections that employees may have made during recent open-enrollment periods.

Employers must plan for 2014

Beginning in 2014, three key changes will take effect:  (1) employers with 50 or more employees who do not offer health coverage, offer insufficient coverage, or offer unaffordable coverage may be subject to penalties under health care reform, (2) many individuals who do not maintain health coverage will be subject to a tax, and (3) the state-based health insurance exchanges will begin to operate.  This trifecta of changes raises unique planning issues for employers who may find that their best financial option is dropping health coverage or changing their health insurance model.

Employers must inform employees about health-insurance exchanges

Beginning on March 1, 2013, employers will have an obligation to give existing employees and new hires information about the health-insurance exchanges, which will begin paying claims as of Jan. 1, 2014. A sample notice is expected to be available prior to the compliance date, but the notice must inform employees about the exchanges and provide information about how employees can contact the exchanges for assistance; inform employees if their employer’s plan does not provide adequate coverage; and inform employees that they may lose the right to health benefits offered by their employer if they purchase insurance through the exchanges.

Additional Medicare tax takes effect

Beginning on Jan. 1, 2013, employers must withhold an extra 0.9 percent of Medicare tax on certain employee earnings. The tax applies to amounts earned over $250,000 for married couples filing jointly, amounts over $125,000 for married couples filing separately, and amounts over $200,000 for single individuals, certain individuals filing as head of household, and certain widow(er)s. Regardless of filing status, employers are directed to withhold the additional tax on amounts greater than $200,000 earned by an employee.

Employers must prepare for auto enrollment

Health care reform’s auto enrollment mandate will require employers with more than 200 full-time equivalent employees to automatically enroll new hires in employer-provided health coverage after those employees complete any required waiting periods (not exceeding 90 days). Auto enrollment will not take effect until regulations are issued, probably by Jan. 1, 2014.

Employers must prepare for nondiscrimination testing of insured plans

Nondiscrimination testing has long been required for self-insured plans, but health care reform includes a mandate extending similar testing to non-grandfathered insured plans – i.e., plans in which medical claims are paid by an insurance carrier. Regulations have not yet been issued covering this requirement, but they are expected in 2013 with an early 2014 effective date. The testing, which will target employers that provide better coverage to their highest-paid workers, comes with steep penalties of up to $100 per day a plan is noncompliant. Employers can expect a grace period to correct compliance issues after regulations are released.

Employers must prepare for new wellness program rules

New wellness program regulations take effect for plan years beginning on or after Jan. 1, 2014. While these new regulations leave the existing rules governing wellness programs largely intact, they do alter the wellness program landscape in several important respects. For example, they increase the maximum reward available through a wellness program from 20 percent to 30 percent (and 50 percent for smoking cessation and prevention programs). In addition, they alter the way in which reasonable alternatives for obtaining a reward must be communicated to participants, and require employers to pay for certain aspects of some reasonable alternatives. Employers offering wellness programs should have those programs examined in 2013 for compliance.

Iris Tilley is an attorney with Barran Liebman LLP. She specializes in employee benefits. Contact her at 503-276-2155 or [email protected].