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

Society for Human Resource Management Magazine

In this article, Fred Oliphant and Garrett Fenton* discuss the Internal Revenue Service's recently issued interim “Q&A” guidance regarding the new requirement, under the Patient Protection and Affordable Care Act (PPACA), that employers report the cost of employer-sponsored health coverage provided to each employee for each year. The new PPACA provisions require employers to report on Form W-2 the “aggregate cost of applicable employer-sponsored coverage” provided to employees, calculated under rules similar to those used to determine the “applicable premium” for COBRA continuation coverage. Among other things, the IRS guidance identifies which employers are subject to the reporting requirement, explains the types of coverage that must be reported and discusses calculation methods for determining the cost of coverage.

The reporting requirement is effective beginning with 2012 Forms W-2 that are issued in January 2013, and is “informational only” (i.e., it will not cause any health coverage that was previously nontaxable to become taxable). The purpose of the requirement is merely to “provide useful and comparable consumer information to employees on the cost of their health care coverage.”

*Former Member