The Patient Protection and Affordable Care Act includes a provision requiring employers to report the aggregate cost of employer health care contributions on the W-2 forms of its workers. The requirement applies to the 2012 tax year and will be required on 2012 W-2 forms. The Internal Revenue Service provided interim guidance last year regarding the requirements in a question and answer format, which ACA International shared with members. The IRS issued a new notice on Jan. 3, 2012, clarifying some of the original answers to questions about the reporting requirements.
One of the most important clarifications in the new guidance concerns an exemption for small businesses. The new notice clarifies the interim relief from the reporting requirement applies to employers with fewer than 250 employees for the preceding calendar year. The reporting requirements may not apply to some highly compensated individuals. On this point, the guidance states the reporting requirement does not apply to the cost of coverage includible in income under Section 105(h) of the Internal Revenue Code, or payments or reimbursements of health insurance premiums for a 2 percent shareholder-employee of an S-corporation who is required to include the premium payments in gross income. The reporting requirements also may not apply to some stand-alone dental and vision plans.
The guidance also includes some new information that was not part of the earlier Q&As. For example, the notice makes clear that employers are not required to include the cost of coverage under an employee assistance program, wellness program or on-site medical clinic in the reportable amount if the employer does not charge a premium with respect to that type of coverage provided under COBRA to a qualifying beneficiary. Also clarified is how to calculate the reportable amount for coverage when only a portion of the coverage constitutes coverage under a group health plan.
Further, clarification is provided on how to calculate the reportable amount if an employer is provided notice after Dec. 31 of a calendar year of events that occurred on or before Dec. 31 that affect the prior year’s coverage, such as an employee providing an employer notice of a divorce or other change in family status that occurred during a prior calendar year.
The notice also reiterates the reporting requirements are only intended to inform employees of the cost of their health care coverage, and do not cause excludable employer-provided health coverage to become taxable. Nothing in the new requirements causes or will cause otherwise excludable employer-provided health coverage to become taxable.