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IRS Issues Guidance on Form W-2 Reporting for Costs of Employer-Provided Coverage

Written by Littler Tuesday, 12 April 2011 23:00

On March 29, 2011, the IRS issued Notice 2011-28, which provides greater clarity to employers in connection with how to administer new Form W-2 reporting requirements for costs of employer-provided health coverage. This reporting is required under Section 6051(a)(14) of the Internal Revenue Code ("Code"), which was added by Section 9002 of the Patient Protection and Affordable Care Act ("PPACA"). The IRS has requested comments on the Notice, which will be due 90 days after the Notice is officially published in the Federal Register.

The reporting requirement was scheduled to become effective for the 2011 tax year, but the IRS issued Notice 2010-69 last October, which delayed enforcement of the requirement until the 2012 tax year (i.e., for Forms W-2 required to be issued by end of January 2013). Notice 2011-28 provides further transitional relief for certain employers as described below.

It is important for employers to begin working with their health care and payroll providers now to ensure that any needed system changes are in place by January 1, 2012. In part, this is because, unlike Notice 2010-69, Notice 2011-28 does not provide any penalty relief for failure to comply with the new reporting requirements. The penalty for such a failure is $200 per Form W-2, up to a maximum of $3 million.

Key provisions from the Notice are summarized below.

Employers Subject to the Reporting Requirement

Except as provided in the Notice's transitional relief described below, virtually all employers that provide "applicable employer-sponsored coverage" under a group health plan must comply with the new reporting requirement. This includes federal, state and local government entities, churches and other religious organizations, and employers that are not subject to the COBRA continuation requirements.

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