The Internal Revenue Service ("IRS") has issued
interim guidance to employers on the Form W-2 informational
reporting requirements under the Patient Protection and Affordable
Care Act ("Affordable Care Act"). Under the Affordable
Care Act, employers are generally required to report the cost of
employer-provided health care coverage on the Form W-2 that they
issue to employees and file with the IRS. However, as discussed
below, the requirement is not effective for most employers until
the 2012 Form W-2 is issued in January 2013.
In Notice 2011-28, the IRS has provided guidance for employers
on how to report, what coverage to include, and how to determine
the cost of the coverage. According to the guidance, the aggregate
reportable cost will be reported on the Form W-2 in Box 12 using
code DD, but it will not be reported on the related Form W-3
transmittal form. The guidance describes the type of
employer-sponsored coverage that is subject to the reporting
Generally, the reporting requirement applies with respect to any
"group health plan." However, certain coverage is
expressly excluded (for example, long-term care coverage, coverage
for on-site medical clinics, and separate dental and vision care).
Furthermore, certain amounts are not included in the aggregate
reportable cost such as contributions to a health savings account
(or Archer medical savings account), flexible spending arrangement
(with respect to salary reduction contributions only), or health
reimbursement arrangement. The reportable cost is generally
determined using COBRA rates. However, the guidance sets forth
certain alternate methods that may be used for insured plans (with
respect to employees), subsidized coverage, and employers that use
The IRS has emphasized that the new reporting to employees is
for their information only--to inform them of the cost of their
health coverage. It does not cause otherwise excludable
employer-provided health coverage to become taxable.
Employer-provided health coverage continues to be excludable from
an employee's gross income for Federal income tax purposes as
provided under the Internal Revenue Code.
It is important to note that under Notice 2010-69, which was
issued last fall, the reporting requirement was made optional for
all employers for the 2011 Forms W-2 (generally to be
furnished to employees in January 2012). The new guidance does not
change the delayed effective date for the requirement. As a result,
no employer has to provide this information on the 2011 Form W-2,
although an employer may voluntarily choose to doso. In Notice
2011-28, the IRS has also provided additional relief for smaller
employers (those filing fewer than 250 W-2 forms). For such
employers, the requirement is optional for 2012 (that is, for 2012
Forms W-2 that generally would be furnished to employees in January
2013). Moreover, the optional treatment continues for such smaller
employers until further guidance is issued.
If you have any questions about the interim guidance, please
contact David Joffe or one of the other attorneys in the
Employee Benefits & Executive Compensation
Group at Bradley Arant Boult Cummings LLP.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Effective January 1, 2015, certain employers became subject to the employer mandate of the Patient Protection and Affordable Care Act, and thus subject to liability under the ACA Employer Shared Responsibility provisions.