Guest Article

(From the October 10, 2011 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

IRS Will Host Seminar on Form W-2 Reporting of Employer Healthcare Coverage

An IRS webinar is scheduled for October 31 on the new requirement for employers to report the value of employer-provided healthcare coverage on Form W-2 beginning in 2012.

The aggregate cost of "applicable employer-sponsored coverage" will have to be reported by employers on Form W-2 beginning in 2012. Small employers—those who file fewer than 250 Forms W-2 for 2011—will not have to comply until 2013. Essentially, the cost of coverage that is made available to an employee by an employer and is excludable from the employee's gross income under Code § 106 will have to be reported. Coverage for long-term care, coverage under a separate policy which provides dental or visions benefits, and other supplemental coverage (e.g., coverage only for accident or disability income insurance) are excluded. Amounts contributed to an Archer MSA or an HSA, or salary reduction contributions to a health FSA are also excluded, although special rules apply in determining the aggregate reportable cost where an employer offers a health FSA.

Notice 2011–28, released earlier this year, addressed the new reporting requirements and explained that the reportable cost would take into account the plan in which the employee is enrolled, the benefit package elected, the coverage tier elected (e.g., self-only, family), and the valuation method chosen. Changes in coverage would be taken into account. Three basic methods for calculating the reportable cost were identified: the COBRA applicable premium method, the premium charged method, and the modified COBRA premium method (where the employer subsidizes the COBRA cost or uses the prior year's applicable premium as the COBRA premium).

According to the IRS announcement, the October 31 webinar will explain:

A set of FAQs on the new reporting requirement, which supplements the IRS's earlier news release on the guidance that has been issued on the topic, has been posted by the IRS.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.220.2692, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2011, Deloitte.