Requirements of the Patient Protection and Affordable Care Act

One of the many requirements of the Patient Protection and Affordable Care Act is that certain employers are now required to report the cost of health care coverage on each employee's W-2.  For many employers, this requirement took effect for the 2012 tax year.

The IRS, however, issued Notice 2012-9 that contained transition relief making the W-2 health care reporting requirements optional for:

1. Employers filing fewer than 250 Forms W-2 for the previous calendar year.

• These employers will not be required to report the cost of coverage on the 2012 Forms W-2 which generally are filed with the Social Security Administration in early 2013.  (For example, employers filing fewer than 250 2011 Forms W-2, meaning Forms W-2 for the calendar year 2011, which generally are filed with the SSA in early 2012.)
• For purposes of this relief, the number of Forms W-2 the employer files includes any forms it files itself and any filed on its behalf by an agent under section 3504 (see Q&A-3 of Notice 2012-9 for more information). In addition, for purposes of this relief, the employer is determined without the application of any aggregation rules;

2. Multi-employer plans;

3. Health Reimbursement Arrangement (HRA) contributions;

4. Dental and vision plans that either:

• Are not integrated into another group health plan or
• Give participants the choice of declining the coverage or electing it and paying an additional premium (see Q&A-20 of Notice 2012-9 for more information);

5. Self-insured plans of employers not subject to COBRA continuation coverage or similar requirements;

6. Employee assistance programs, on-site medical clinics, or wellness programs for which the employer does not charge a premium under COBRA continuation coverage or similar requirements; and

7. Employers furnishing Forms W-2 to employees who terminate before the end of a calendar year and request a Form W-2 before the end of that year.

The IRS stated that this transition relief would continue until changed by future guidance.  It also stated that it would provide taxpayers with at least six months' advance notice of any changes to the transition relief.

So, for the time being, small employers (those filing fewer than 250 W-2s) do not need to worry about reporting the cost of health care coverage on employees' W-2s.  They have the option of doing so.  This will likely change in the near future, but watch for additional information on this topic.  The IRS has also published a compliance chart regarding this requirement that you may find useful.  Please click here to view the IRS compliance chart.

Written by Jason Mettley.