At the beginning of the year, the Internal Revenue Service issued IRS Notice 2012-9 (the Notice) regarding informational reporting to employees, via form W-2, of the cost of their employer-sponsored health coverage. The Notice supersedes prior IRS guidance on this reporting requirement.
The Notice emphasizes that the reporting to employees is for their information only. It is intended to inform them of the cost of health care coverage provided by their employer and does not cause excludable employer-provided health care coverage to be taxable.
The Notice is generally applicable beginning with 2012 Forms W-2 (i.e., forms required for 2012 that employers are generally required to give employees by the end of January 2013). Employers may rely upon the guidance provided in the Notice until further guidance is issued.
The Notice contains 39 Q&As, several of which make changes to previous IRS guidance or address new topics. Among other points of interest:
- Employers that are required to file fewer than 250 Forms W-2 for 2011 will not be subject to the reporting requirement for 2012 Forms W-2.
- The reporting requirement does not apply to coverage under a health care flexible spending account if contributions occur only through employee salary reduction elections.
- The reporting requirement does not apply to payments or reimbursements of health insurance premiums for a 2% shareholder-employee of an S corporation who is required to include the premium payments in gross income.
- Employers are not required to report the cost of coverage under an employee assistance program (EAP), wellness program or on-site medical clinic if the employer does not charge a premium with respect to that type of coverage when it is provided under COBRA.