As described in press release IR 2011-31, the IRS issued interim guidance to employers, Notice 2011-28, on informational reporting of each employee’s annual Form W-2 of the cost of health insurance coverage they sponsor for employees. The IRS is also requesting comments on this interim guidance.
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 wages or income to be subject to tax. The cost will be reported in Box 12 wit Code DD on Forms W-2.
The 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).
Notice 2011-28 provides relief for smaller employers (those file with the SSA fewer than 250 Forms W-2 for the previous year) by making this requirement optional for them at least for 2012 Forms W-2. Therefore, any employer that files fewer than 250 Forms W-2 for 2011 (generally furnished in 2012) will not be subject to the requirements for 2012 Forms W-2. the relief for small employers will continue until further guidance is issued.
Other types of relief that will apply for 2012 and until further guidance include exceptions for:
- multiemployer plans
- separate dental and/or visions plans, and
- Forms W-2 that are furnished to employees who terminate before the end of a calendar year and request a Form W-2 before the end of the year.
For employers that are subject to the reporting requirement for 2012 Forms W-2 (or choose to report the cost of health care coverage on 2011 Forms W-2), the notice explains:
- how to calculate the cost of coverage, generally including amounts paid by the employer and employee, but also covering methods for self-insured plans;
- how to treat salary reductions for health flexible spending arrangements; and
- that employers will not be required to issue a Form W-2 to anyone to whom the employer would not otherwise issue one (such as retirees with continuing health benefits).
More information about the tax provisions in the Affordable Care Act is on the ACA page of IRS.gov.