IRS Releases Rules on W-2 Health Insurance Reporting

The Internal Revenue Service has recently issued a notice providing interim guidance on how businesses should report to employees their employer-sponsored group health plan coverage amounts as required under Section 6051(a)(14), enacted as part of the Affordable Care Act.  Notice 2011-28 is valid for all employers who sponsor a group health insurance plan offered to their employees.

In general, employers are required to report the aggregate cost of employer-sponsored coverage on an employee’s W-2 form.  The amount should be listed in Box 12 of the W2, using Code DD. The IRS has stated that the new reporting requirement is for informational purposes only, and the amount reported will not affect the taxability of the insurance coverage. This new reporting requirement begins with the 2012 calendar year, however there is an exemption, for at least one year, for small employers that issue less than 250 W-2 forms per year.

The notice defines and provides additional guidance in regards to items such as: aggregate cost, applicable employer-sponsored coverage, subjected employers, calculation methods, and other general requirements. Also included in the notice are 31 “Q&A” type discussions.