The IRS has issued interim guidance to clarify informational reporting by employers to employees on the cost of employer-provided health insurance. The IRS also updated existing frequently asked questions (FAQs) and posted new FAQs on its website.
“Including this information on Form W-2 has no impact on whether the coverage is taxable; it is for informational purposes only,” Kimberly McCarthy, partner, Partridge, Snow and Hahn, LLP, Providence, R.I., told CCH “The employer generally must report the entire cost of coverage based on the information available as of December 31 of the calendar year. Any election or notification in the subsequent calendar year is not required to be included in the calculation, even if it has retroactive effect, “McCarthy explained.
The Patient Protection and Affordable Care Act (PPACA) generally requires employers to disclose the aggregate cost of applicable employer-sponsored coverage on an employee’s Form W-2 for tax years beginning on or after January 1, 2011. To give employers more time to update their payroll systems, the IRS made reporting optional for all employers.
The interim guidance, the IRS explained, is generally applicable to 2012 Forms W-2 (forms that employers will provide to employees in 2013). Employers may rely on Notice 2012-9 if they voluntarily report the cost of coverage on 2011 Forms W-2, the IRS advised. The interim guidance describes employer-sponsored coverage, method of reporting, aggregate cost of coverage, and more.
Applicable employer-sponsored coverage is coverage under any group health plan made available to the employee by an employer excluded from the employee’s gross income under Code Sec. 106 or would be excluded if it were employer-provided coverage within the meaning of Code Sec. 106, the IRS explained. The reporting requirement does not apply to contributions to HRAs, HSAs, MSAs, and FSAs funded solely by employee pre-tax salary contributions on the W-2,” McCarthy noted.
For 2012 Forms W-2 (and W-2s issued in later years unless and until further guidance is issued), an employer is not subject to reporting for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year, the IRS explained.