IRS REVISES GUIDANCE ON HEALTH INSURANCE COVERAGE INFORMATION REPORTING FOR EMPLOYERS

The Patient Protection and Affordable Care Act of 2010 includes a provision, with the addition of Internal Revenue Code ("IRC") §6051(a)(14), that certain businesses must begin reporting the aggregate cost of employer-sponsored group health coverage provided to employees on their respective Forms W-2.

Internal Revenue Service ("IRS") Notice 2011-28 provided detailed interim guidance, in question and answer format, that addressed terms with respect to this new reporting requirement such as employers subject to the reporting requirements, types of coverage included, methods for calculating and reporting the cost and various other issues related to the new law. This Notice required employers to report the aggregate cost of employer sponsored health coverage beginning with the 2011 tax year (Forms W-2 to be issued in January of 2012).

In October, 2010, the IRS issued Notice 2010-69 which made the reporting optional for the 2011 tax year; mandatory for 2012 (Forms W-2 that will be issued in January, 2013). As a result of a comment period which closed on July 18, 2011, the IRS issued Notice 2012-9 in January of 2012 which restated, clarified and expanded IRS Notice 2011-28.

Employer-sponsored coverage is coverage under any group health plan made available to an employee by an employer which is excludable from an employee's gross income under IRC §106, or would be so excludable if it were employer provided coverage. Employer-sponsored coverage also includes the cost for an employee's dependents participating in the group health plan. Several types of benefits are excluded from the new reporting requirement including, but not limited to, the following:

• Long-term care.
• Separate (not integrated into a group health plan) policies for the mouth and eyes (dental and vision).
• Multi-employer plans.
• Health reimbursement accounts.
• Health savings accounts.
• Self-insured plans not subject to COBRA or other federal coverage continuation requirements (e.g. church plans).
• Contributions to a flexible spending account to the extent not in excess of the employee's salary reduction election.
• Wellness programs or employee assistance programs.

The IRS has also provided transitional relief in certain instances. The following are employers that are not subject to the reporting requirements at this point in time:

• Employers with less than 250 Forms W-2 issued in the preceding year, and
• Terminated employees that request a Form W-2 prior to the end of the year.

The reportable cost to be disclosed includes both employer and employee portions and will be reported on 2012 Forms W-2 in box 12 utilizing the code "DD". In the event an individual has multiple employers during the year all employers are required to report the cost on the employee's respective Form W-2. In addition, as originally outlined in IRS Notice 2011-28, this new reporting requirement is for informational purposes only and will not be subject to income taxation. The IRS states that the purpose of the requirement is "to provide useful and comparable consumer information to employees on the cost of their health care coverage."

Employers that issued 250 or more Forms W-2 for 2011 are subject to this new reporting requirement on 2012 Forms W-2. Accordingly, we recommend that these employers start planning now for 2012 Form W-2 preparation purposes and compliance with this new reporting requirement.

Please contact a member of WS+B's Healthcare Services Group for further questions or assistance.