Recently, the Internal Revenue Service issued guidance under the Patient Protection and Affordable Care Act (PPACA) to implement the requirement that employers report the cost of employer-sponsored health coverage to employees on Form W-2. As is described in more detail below, reporting is generally required for 2012, though there is an exception for small employers. In addition, the tri-agency task force that issues guidance regarding health plans’ compliance with PPACA released additional Frequently Asked Questions. These latest FAQs address issues related to the loss of grandfather status under PPACA, providing several helpful clarifications on changes that can be made to a health plan without causing it to cease to be grandfathered and clarifying when loss of grandfather status will be effective if it does occur. The FAQs are discussed in more detail below.
IRS Notice 2011-28 on W-2 Reporting for the Cost of Health Coverage
IRS Notice 2011-28 (the Notice) provides interim guidance on reporting the cost of employer-sponsored health coverage on Form W-2, as is required under the Internal Revenue Code (Code), based on amendments made by PPACA. The Code would have required reporting for 2011; however, IRS Notice 2010-69 delayed the requirement. Notice 2011-28 now makes the reporting mandatory for most employers beginning in 2012 (with the Forms W-2 issued in January 2013).
The requirement applies to all employers that provide applicable employer-sponsored coverage (whether fully insured or self-insured), except certain Indian tribal governments and employers that provide self-insured coverage that is not subject to continuation coverage requirements (such as COBRA). This coverage includes both health coverage paid for by an employer that is excludable from the employees’ income under Code section 106 and the employee-paid portion of coverage that would be excludable under Code section 106 if it were employer-provided coverage. The cost of HIPAA-excepted coverage under Code section 9832(c)(1) (such as accident-only, disability, and general liability insurance), long-term care coverage, stand-alone vision or dental coverage, coverage specifically for specified diseases or illnesses or hospital indemnity insurance is not reportable. However, the reportable coverage includes coverage provided at on-site medical clinics, and vision and dental coverage provided under a comprehensive employer-sponsored group health plan.
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