IRS Issues Additional Guidance on Form W-2 Health Care

PUTTING PEOPLE FIRST

The U.S. Internal Revenue Service (IRS) has issued Notice 2012-9 to provide additional guidance on the informational reporting to employees of the cost of their employer-sponsored group health plan coverage on Form W-2.  The IRS requested public comments on the W-2 reporting requirement in Notice 2011-28. Notice 2012-9 responds to these comments and amends, restates and supersedes Notice 2011-28.  Specifically, the new notice includes guidance on the W-2 reporting as it relates to small employers, flexible spending accounts, dental and vision plans, COBRA and health reimbursement arrangements.

Health care cost information will have to be reported on 2012 W-2s, which will be issued in 2013. Under previous IRS guidance, smaller employers — those that distribute fewer than 250 W-2s in 2011 — are exempt from this requirement until at least 2014 and possibly longer.

The latest guidance, released Tuesday, makes clear that employers can — but are not required to — report contributions to health reimbursement arrangements in calculating health care costs.  In addition, the cost of providing coverage through employee assistance programs, wellness programs or on-site medical clinics is not required to be reported if the employer does not charge premiums for the coverage to COBRA beneficiaries.  The guidance also clarifies that the reporting requirement does not apply to Indian Tribal governments.

The latest guidance also reiterates numerous provisions in last year’s guidance, including that the cost of coverage that is taxable to employees, such as for a child over age 26, must be reported on the W-2, and that contributions employees make to flexible spending accounts are to be excluded from the health care cost figure.

The full 23-page text of the Notice can be found at:
http://www.irs.gov/pub/irs-drop/n-12-09.pdf.

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