In early January, the Internal Revenue Service (IRS) released Notice 2012-9, which clarified and revised the requirements for disclosing the aggregate cost of employer-sponsored health coverage on employees' annual Form W-2, Wage and Tax Statements. Notice 2012-9 revised portions of Notice 2011-28, in addition to adding new requirements and restating other portions of the prior guidance. (For a prior summary of Notice 2011-28, please see our June 23, 2011, issue of the Health Law Update.)
As background, the informational disclosures to employees are required pursuant to Internal Revenue Code (Code) Section 6051(a)(14) (which was added by Section 9002(a) of the Patient Protection and Affordable Care Act (PPACA)). The IRS previously issued guidance (including Notice 2010-69 and Notice 2011-28) interpreting Code Section 6051(a) in order to assist employers with making the disclosures. These reporting requirements are informational only. Nothing under Code Section 6051(a)(14) or the related guidance causes or would cause otherwise tax-excludable employer-provided healthcare to become taxable to the employee.
Notice 2012-9 contains 39 questions and answers which, among other requirements:
- Briefly discuss the general requirements of Section 6051(a)(14) of the Code;
- Identify the employers subject to the reporting requirements and clarify that employers who file fewer than 250 Forms W-2 in the preceding calendar year are exempt from the reporting requirements, beginning with 2012 Forms W-2 (except that employers who use agents to file Forms W-2 will be exempt only if the employer would have filed fewer than 250 Forms W-2 if it had not used the agent);
- Provide methods for reporting the cost of coverage on the Form W-2;
- Define certain terms related to the cost of coverage which employers must report on the Form W-2;
- Set forth the types of coverage which employers must include in the amount reported on the Form W-2 (including the amount, if any, of a health flexible spending arrangement which exceeds the corresponding salary reduction elected by the employee for the plan year);
- Clarify that the cost of coverage under a dental plan or a vision plan need not be included in the aggregate reportable cost if the plan satisfies the requirements for excepted benefits under the Health Insurance Portability and Accountability Act (HIPAA);
- Describe calculation methods that employers may use to determine the cost of coverage when a payroll period includes December 31 and continues into the subsequent calendar year;
- Address various other issues employers may encounter in calculating the cost of coverage, including the extent to which an employer must include the cost of coverage provided under an employee assistance program (EAP), wellness program or on-site medical clinic in the aggregate reportable cost reported on the Form W-2; and
- Provide transition relief in the reporting of certain types of employer-sponsored coverage.
The guidance contained in Notice 2012-9 is generally applicable beginning with the 2012 Forms W-2 (provided to employees in January 2013). However, employers who voluntarily report the cost of coverage on 2011 Forms W-2 may rely upon the guidance contained in Notice 2012-9.