Interim Guidance on W-2 Reporting of Employer-Provided Health Coverage

The IRS has issued interim guidance on informational reporting for employees on form W-2 to see the cost of their employer-sponsored group health plan coverage. This informational reporting is required under § 6051(a)(14) of the Code, enacted as part of the Affordable Care Act to provide useful and comparable consumer information to employees on the cost of their health care coverage.

Michael Young a ConnectPay member cited the IRS Notice 2011-28 as stating that this reporting is for employees information only, to inform them of the cost of their health care coverage, and does not cause excludable employer provided health care coverage to become taxable.

The IRS Notice gives a start date of 2012 W-2 forms provided to employees in January of 2013. Employers can make a voluntary earlier reporting on the 2011 W-2 Forms provided to employees in January 2012 but will not be required to report until the 2012 tax year.

Paul Altavena a ConnectPay member states that Section 6051(a)(14) does not apply to reporting the amount contributed to any health savings account (as defined in § 223(d)) of an employee or an employee’s spouse. Further, Section 6051(a)(14) also does not apply to the amount of any salary reduction contributions to a flexible spending arrangement (within the meaning of §§ 106(c)(2) and 125).

Mr. Altavena explains that the term “applicable employer sponsored coverage” means coverage under any group health plan made available to the employee by an employer which is excludable from the employee’s gross income (that portion of coverage for an employee or an employee spouse’s insurance premiums paid by the employer.)

The notice provides answers for employers on how to report on Form W-2, what coverage to include and exclude, and how to determine the cost of the coverage. All is provided in a Question-and-Answer format. Click here to see the actual IRS Notice 2011-28.