23 Feb New Year Brings Extra W-2 Duty for Many

Although 2012 is just getting started, many employers are already looking ahead to next year for a change in Form W-2 reporting.

Under the Patient Protection and Affordable Care Act (PPACA), companies are required to report the value of their employer-sponsored health care coverage on employees’ W-2s. This takes effect for most employers this year, meaning the values must be represented on the forms issued in 2013. Smaller employers — those with fewer than 250 W-2s to distribute, are exempt until at least 2014.

The IRS has issued a series of notices to help employers handle this new task. The guidance, according to Michael R. Durnwald of the law firm Katten Muchin Rosenman LLP, clarifies that:

• While the value of the plans must be reported, it does not affect the tax treatment of the health care coverage.
• Employers do not have to create a W-2 to satisfy this requirement for someone who normally would not receive a form (a retiree with health benefits, for instance).
• Employers can calculate the value in a number of ways, including using the COBRA premium.
• Flexible spending accounts, dental and vision plans should not be included in the value calculation.

The IRS added to that guidance shortly after the New Year’s holiday, according to a report by Business Insurance. The IRS further clarified that employers can include contributions to health reimbursement arrangements in the calculation, but are not required to do so.

Also, costs related to wellness initiatives, employee assistance programs and on-site clinics do not need to be included as long as the employer doesn’t charge premiums for them under COBRA.

Ultimately, however, the fate of this and other provisions of PPACA rests in the hands of the Supreme Court, which announced in December that it would start hearing oral arguments regarding the health care reform law in late March. A final ruling is expected in June, according to a Reuters report.