Employers got a little compliance help recently, when Washington addressed the Forms W-2 and 1099-Misc reporting requirements enacted into law as part of the 2010 Patient Protection & Affordable Care Act (PPACA).

This edition covers the new W-2 reporting requirement. Next week we’ll provide an update on repeal of the 1099 requirement—the first provision of the controversial new law to be knocked out.

On March 29 IRS issued long-awaited guidance, in Q/A format, on the PPACA mandate that employers report the value of employer-provided health coverage on employees W-2s. While the new requirement was intended for information purposes only, the statute itself offered little guidance as to what items were to be included and even less on how “value” was to be calculated. Read more.

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Healthcare Reform Reporting Requirements: One Clarified; One Repealed

Tue Apr 12, 2011

Employers got a little compliance help recently, when Washington addressed the Forms W-2 and 1099-Misc reporting requirements enacted into law as part of the 2010 Patient Protection & Affordable Care Act (PPACA).

This edition covers the new W-2 reporting requirement. Next week we’ll provide an update on repeal of the 1099 requirement—the first provision of the controversial new law to be knocked out.

On March 29 IRS issued long-awaited guidance, in Q/A format, on the PPACA mandate that employers report the value of employer-provided health coverage on employees W-2s. While the new requirement was intended for information purposes only, the statute itself offered little guidance as to what items were to be included and even less on how “value” was to be calculated.

IRS acknowledged as much last fall when it postponed the mandate’s effective date from 2011 to 2012 W-2s, i.e., to Forms W-2 to be furnished to employees in January 2013.

In Notice 2011-28 IRS specifies that the new reporting requirement is for employee information purposes only, “to provide useful and comparable consumer information…on the cost of their health coverage.”

According to IRS, employers are to report in Box 12 Code DD the “aggregate cost of applicable employer-sponsored coverage,” i.e., health coverage under any group health plan “which is excludable from the employee’s gross income.”

This is assumed to include the total cost of major medical coverage, so-called “Mini-Med” plans, on-site medical clinics and similar coverages. “Aggregate reportable cost” includes both the portion paid by the employer and the portion paid by the employee, e.g., through Sec 125 salary reduction programs.

Employers are not to include FSA, HSA or HRA contributions, or stand-alone dental and vision coverages, in the amounts reported.

Notice 2011-28 instructs employers to calculate the “reportable cost” of employer-sponsored coverage “using the COBRA applicable premium method,” the “premium charged method,” or a “modified COBRA premium method.”

Recognizing the difficulty employers may have in applying the various calculation methodologies to the array of coverages required to be reported, as well as the questions the interim guidance no doubt prompted, IRS has invited comments by June 27, 2011.

This suggests not only that IRS intends to issue additional guidance this Fall, but that the agency remains a long way from being able to answer all the questions employers will have about how to comply with the complicated new W-2 reporting requirement.