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IRS Issues Guidance on Reporting Health Coverage on W-2’s

Still wondering about how to report health coverage on W-2s, which is required by PPACA?  More guidance was issued on January 3, 2012 in IRS Notice 2012-9.  Under the new rules, employers must report the aggregate cost of “applicable employer-sponsored coverage,” which generally consists of employer-sponsored coverage under a group health plan (insured or self-funded) that is excludable from the employee’s gross income. The reportable cost generally includes the portion of the cost paid by the employer and the amount paid by the employee, regardless of whether paid through pre-tax or after-tax contributions.

Under this most recent guidance, the good news is that the reporting requirement appears to be suspended for employers with fewer than 250 W-2s issued for the prior calendar year.   It also appears that reporting requirements do not apply to coverage under a flexible spending arrangement if contributions occur only through employee salary reductions.  Also, for dental and vision plans, it appears that the standard for determining whether coverage under a dental plan or vision plan is subject to the reporting requirement is whether the benefits are offered under a separate policy, certificate or contract or insurance, or if the participants have the right not to elect the dental or vision benefits and if they do they must pay an additional premium or contribution.

Fortunately, the notice also includes some new Q&A’s not contained in Notice 2011-28.   These Q&A’s include explanations about employee assistance program, wellness program or on site-medical clinic and also provide guidance about contributions to multiemployer plans.  The Notice also provides that this guidance is applicable starting with 2012 W-2s.  So your 2103 W-2s will have to comply with these rules.  But employers should definitely review both of these notices sooner rather than later and make sure they are prepared to make appropriate reportings come January 2013.

by Keith R. McMurdy