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IRS Updates Guidance Regarding Form W-2 Reporting of Group Health Insurance Cost

    Client Alerts
  • January 06, 2012

In Notice 2012-9, the IRS recently restated and amended its interim guidance on informational reporting to employees of the cost of their employer-sponsored group health insurance. This supersedes initial guidance provided in Notice 2011-28 and is applicable until further guidance is issued. 

Under Section 6051(a)(14) of the Internal Revenue Code, enacted as part of the Patient Protection and Affordable Care Act, employers are required to report the cost of employer-sponsored group health plan coverage on Forms W-2 for 2012 and later years (this reporting is for informational purposes only and does not cause health care coverage to become taxable). Employers may rely on the guidance provided in this notice if they choose to voluntarily report the cost of coverage on their 2011 Forms W-2. 

Notice 2012-9 makes changes to Notice 2011-28, and provides additional guidance and clarification. Employers must include the cost of any supplemental health benefits paid by them, such as cancer insurance, but do not have to include the cost of supplemental health benefits paid by employees with after-tax dollars. The IRS also clarified that the reporting requirements are not applicable to coverage under a health FSA or to the cost of coverage under a dental or vision plan that is an excepted benefit under HIPAA (generally, offered under a separate policy from other health benefits). 

Finally, the notice provides interim transition relief for certain employers and certain types of employer-sponsored coverage intended to facilitate compliance with these new reporting requirements. For example, employers required to file fewer than 250 Forms W-2 in 2011 are exempt from these reporting requirements for 2012. While future guidance may limit the availability of this exception, it will only apply prospectively.

Employers should make sure that their payroll providers make appropriate adjustments so that the necessary information will be available for preparation of 2012 Forms W-2.