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Health Care Reform: PPACA Guidance on W-2 Reporting

IRS issues PPACA guidance on W-2 reporting

The IRS emphasized that the new reporting to employees is for their information only, to inform them of the cost of their health coverage, and does not cause excludable employer-provided health coverage to become taxable; employer-provided health coverage continues to be excludable from an employee's income, and is not taxable.

 

The Patient Protection and Affordable Care Act provides that employers are required to report the cost of employer-provided health care coverage on the Form W-2.

Notice 2010-69, issued last fall, made this requirement optional for all employers for the 2011 Forms W-2 (generally furnished to employees in January 2012).

In the guidance, the IRS provided further relief for smaller employers (those filing fewer than 250 W-2 forms) by making this requirement optional for them at least for 2012 (i.e., for 2012 Forms W-2 that generally would be furnished to employees in January 2013) and continuing this optional treatment for smaller employers until further guidance is issued.

Using a question-and-answer format, Notice 2011-28 also provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012.

The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage. The 2011 Form W-2, prior IRS Notice 2010-69 deferring the reporting requirement for 2011, and Notice 2011-28 containing the new guidance are available on IRS.gov.

The notice provides interim guidance that generally applies beginning with 2012 Forms W-2 (that is, the forms required for the calendar year 2012 that employers generally are required to furnish to employees in January 2013 and then file with the Social Security Administration. Employers are not required to report the cost of health coverage on any forms required to be furnished to employees prior to January 2013.

See Notice 2010-69. However, any employers that choose to report earlier (on the 2011 Forms W-2 generally furnished to employees in January 2012) may look to this notice for guidance regarding that voluntary earlier reporting.

The notice also provides additional transition relief for certain employers and with respect to certain types of employer-sponsored coverage. This transition relief will continue at least through the 2012 Forms W-2 that are required to be furnished to employees in January 2013.

In other words, those employers for whom the additional transition relief applies, including smaller employers that are required to file fewer than 250 2011 Forms W-2, will not be required to report the cost of health coverage on any forms required to be furnished to employees prior to January 2014.

The transition relief will continue until the issuance of further guidance.