The Internal Revenue Service (“IRS”) has amended its guidance to employers on how to report the cost of group health coverage. Notice 2012-9 addresses, among other things, cost determinations for employee assistance programs, wellness programs, and health reimbursement arrangements.
Internal Revenue Code section 6051(a)(14), enacted as part of the Patient Protection and Affordable Care Act of 2010, requires employers to report each year the aggregate cost of employer-sponsored group health coverage on Form W-2 (excluding amounts contributed to Archer Medical Savings Accounts and health savings accounts, and employee salary reduction contributions to health flexible savings arrangements). Although effective for the 2011 tax year, the IRS delayed enforcement of the section until 2012. Thus, beginning with the cost for 2012, employers must report the cost of health care coverage for each employee on the employee’s W-2, and the Form W-2s must be issued no later than January 31, 2013.
The new Notice also clarifies, among other things, that:
- small businesses filing fewer than 250 W-2s are not subject to the health care cost reporting requirement for 2012 (at least);
- the acceptable methods for determining the cost of coverage for an employee who terminates employment during the year;
- the reportable cost includes both pre-tax and after-tax employee contribution amounts for reportable coverage;
- the standard for determining whether a dental or vision plan is subject to the reporting requirement is the same as the standard for determining whether that dental or vision plan is subject to the Health Insurance Portability and Accountability Act regulations.
Generally, the reportable cost is determined by using the same method used to determine the applicable premium for COBRA purposes (actuarially determined for self-funded plans or simply the insurance premium for insured plans). However, employers with self-funded plans in particular have some flexibility in this regard.
IRS continues to accept and consider comments submitted in response to its earlier guidance on the reporting requirement in Notice 2011-28. Jackson Lewis attorneys are available to assist employers and other interested parties to submit comments to help shape the regulatory guidance regarding health care cost reporting.