Press Room: Tax Release

April 01, 2011

Positive News for Small Employers: Health Care Cost Reporting

Positive news for “small employers” regarding the reporting of employer-sponsored health costs. Interim guidance provided by IRS delays reporting:

Summary

Small employers, those who file fewer than 250 Forms W-2, will not be required to disclose the value of employer-sponsored health coverage on their employees’ Forms W-2 through at least 2012, or until further guidance is issued. The interim guidance also provided information regarding (i) the methods for reporting the cost of coverage, (ii) the types of coverage the cost of which is required to be reported, and (iii) the calculation methods that may be used to determine the cost of coverage.

Discussion

As part of the Affordable Care Act, all employers are required to report (for information purposes only) to employees the cost of their employer-sponsored health care coverage. In general, employer-sponsored coverage means coverage under any group health plan made available to the employee by an employer which is excludible from the employee’s gross income or would be excludible if it were employer-provided coverage.

In the format of Q&As, the IRS issued Notice 2011-28 providing interim guidance relaxing the information reporting requirements for employer-sponsored health coverage. Under the new guidance, all employers may voluntarily report the cost of employer-sponsored health coverage for 2011. Starting in 2012, all employers, other than “small employers”, are required to report the value of employer sponsored health coverage on their employees’ Forms W-2. Small employers, those who file fewer than 250 Forms W-2, are not required to report the value of employer sponsored health coverage until further guidance is provided, but no earlier than on the Forms W-2 filed for 2013. Thus, the earliest small employers will report this information is January 2014.

The Notice also provides guidance on the nuts and bolts of the information reporting rules for employers who will be subject to reporting, and those employers that choose to voluntarily comply with the reporting rules. The Q&As are categorized as follows: (1) general requirements, (2) methods for reporting the cost of coverage on Form W-2, (3) definitions of terms relating to the cost of coverage required to be reported on Form W-2, (4) the types of coverage the cost of which is required to be included in the amount reported on Form W-2, (5) calculation methods that may be used to determine the cost of coverage, and (6) other issues that employers may encounter in determining the cost of coverage.

Click on the link below to view a copy of the notice.

Notice 2011-28