What is the PPACA Form W-2 Reporting Requirement for 2011?

October 19, 2010 (PLANSPONSOR.com) - We have been receiving many questions about the new Form W-2 requirement and whether and when the Internal Revenue Service ("IRS") might issue guidance and/or provide transition relief with respect to the requirement.


Under the Form W-2 reporting rules, employers are required to furnish a Form W-2 to each employee on or before January 31 of the succeeding year.  If an employee’s employment is terminated before the close of a calendar year, employers are required to furnish the form within 30 days after the date of receipt of a written request from the employee if the 30-day period ends before January 31.

Section 9002 of PPACA amended these rules to require that employers include the “aggregate cost” of “applicable employer-sponsored coverage” on an employee’s Form W-2.  The new requirement is effective for taxable years beginning on or after January 1, 2011, meaning that employers could be required to provide a 2011 Form W-2 including this new information as early as January 31, 2011 for an employee terminating on the first day of 2011.

Recent Relief

On October 12, the IRS provided needed transition relief from the new Form W-2 reporting requirement, effectively making it optional for 2011 (see IRS Announces Relief on Health Cost Reporting Mandate).  Specifically, the IRS issued Notice 2010-69, which provides that the new Form W-2 reporting requirement is not mandatory for Forms W-2 issued for 2011.  This means that employers will not be treated as failing to meet the Form W-2 reporting requirements for 2011, and thus will not be subject to any penalties for failure to meet the requirements, merely for failing to report the cost of employer-sponsored coverage. 

According to the Notice and a press release accompanying the Notice, the IRS and Department of Treasury determined that this interim relief is necessary to provide employers with additional time to make necessary changes to their payroll systems and procedures in preparation for compliance with the new requirement. 

The IRS also posted on its website a draft Form W-2 for 2011.  The draft form indicates that the cost of employer-sponsored coverage can be reported in existing Box 12 on the form, using new code “DD.”  This is a helpful development, because establishing a new box on the form likely would have required additional system changes and costs.  The draft form also makes it clear that this amount is not taxable income to employees.

The Notice and IRS press release indicate that additional guidance will be issued later this year.  Presumably, this guidance will provide more details on what items must be reported and how the cost of those items is to be determined. 


Got a health-care reform question?  You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions

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.