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IRS Issues Guidance on Reporting Cost of Health Care on Form W-2

The Internal Revenue Service (IRS) on March 29, 2011 issued Notice 2011-28 providing guidance for employers on reporting the cost of employer-provided health care coverage on Form W-2, which is required by the Patient Protection and Affordable Care Act (Affordable Care Act) (P.L. 111-148). Previously, in Notice 2010-69, the IRS made this requirement optional for all employers for the 2011 Form W-2 (due January 31, 2012) but mandatory for the 2012 Form W-2 (due January 31, 2013). Notice 2011-28 provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012. The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage. In addition, for smaller employers (those filing fewer than 250 W-2 forms), the IRS makes this requirement optional at least for 2012 and continuing this optional treatment for smaller employers until further guidance is issued.

Code section 6051(a)(14) as added by the Affordable Care Act provides generally that the aggregate cost of applicable employer-sponsored coverage must be included in the information reported on Form W-2. For this purpose, the aggregate cost is to be determined under rules similar to the rules of section 4980B(f)(4), referring to the definition of the “applicable premium” for purposes of Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. The Aon Hewitt bulletin available below provides a summary of key highlights of the IRS guidance that employers should be aware of in complying with this requirement.

IRS Issues W2 Guidance