Late last month, the IRS issued guidance on how employers will report the aggregate cost of employer-sponsored health coverage provided to an employee on Form W-2. The Patient Protection and Affordable Care Act (PPACA) imposed the reporting requirement, originally effective for the 2011 Form W-2s (for issuance in 2012). However, an earlier IRS Notice postponed this reporting requirement until the 2012 Form W-2s (for issuance in 2013).

Calculation of Aggregate Cost. The aggregate cost of coverage provided to the employee includes amounts that both the employer and the employee pay. In addition, the aggregate cost includes any portion of the cost of coverage that is includable in the employee's gross income (for example, the cost of coverage provided to over-age 26 dependents). The reporting requirement applies to only "applicable employer sponsored coverage," defined as coverage under any group health plan that is excludable from the employee's gross income under Internal Revenue Code Section 106, or that would be so excludable if it were employer-provided coverage that same section.