Section 9002 of PPACA added Internal Revenue Code (“Code”) section 6051(a)(14), which requires that the “aggregate cost” of “applicable employer-sponsored coverage” be reported on Form W-2 effective for taxable years beginning on or after January 1, 2011. Code section 6051(a) generally requires an employer to furnish a Form W-2 to each employee on or before January 31 of the following year, or, if an individual’s employment is terminated before the close of the year, within 30 days after the date of receipt of a written request from the employee (if that 30-day period ends before the January 31 due date).
In October 2010, the IRS issued Notice 2010-69, which made the PPACA Form W-2 reporting requirement optional for 2011 Forms W-2, and indicated that further guidance would be issued on what should be reported. On March 29, 2011, the IRS issued Notice 2011-28 (and a series of “frequently asked questions” or “FAQs”), which provide further transition guidance and relief on reporting the cost of employer-provided health coverage on Form W-2.
Among other things, Notice 2011-28 provides the following guidance and relief:
- Generally, employers (including governmental and tax-exempt entities and churches) will be required to report the cost of employer-sponsored health coverage beginning with the 2012 Form W-2 required to be furnished in January 2013.
- Employers are not required to report the cost of employer-sponsored health coverage on any Forms W-2 required to be furnished to terminated employees before January 2013.
- Small employers who file fewer than 250 Forms W-2 for 2011 will not be subject to the reporting requirement for the 2012 Form W-2 (and reporting will not be required for such employers for the 2013 Form W-2 unless and until future IRS guidance is issued).
- The applicable employer-sponsored health care amount will be reported on the Form W-2 in box 12, using Code “DD.”
- The reported amount is for informational purposes only and does not cause otherwise excludible amounts to be included in an employee’s income.
- No amount is required to be reported for any individual who is not otherwise required to be provided a Form W-2. This means that a Form W-2 with the applicable employer-sponsored health care amount does not have to be provided to retirees or other former employees who do not receive any reportable compensation from an employer. (However, to the extent deferred compensation is paid to a former employee and reported on Form W-2, this may trigger the reporting requirement.)
- The transitional guidance in Notice 2011-28 applies until further guidance is issued, and any additional guidance will apply prospectively.
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You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html
Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm’s Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.