IRS Issues Additional Guidance on W2 Reporting

WASHINGTON—Newly released Internal Revenue Service guidance resolves additional questions employers have raised about a health care reform law provision that will require them to report the cost of health care coverage on employees' W-2 wage and income statements.

Under that requirement, health care cost information will have to be reported on 2012 W-2s, which will be issued in 2013. Under previous IRS guidance, smaller employers—those that distribute fewer than 250 W-2s in 2011—are exempt from this requirement until at least 2014 and possibly longer.

Some exemptions to reporting rule

The latest guidance, released Tuesday, makes clear that employers can—but are not required to—report contributions to health reimbursement arrangements in calculating health care costs.
In addition, the cost of providing coverage through employee assistance programs, wellness programs or on-site medical clinics is not required to be reported if the employer does not charge premiums for the coverage to COBRA beneficiaries.

The guidance also clarifies that the reporting requirement does not apply to Indian Tribal governments.

In all, “This is very helpful guidance,” said Anne Waidmann, a director with PricewaterhouseCoopers L.L.P. in Washington.

The latest guidance also reiterates numerous provisions in last year’s guidance, including that that the cost of coverage that is taxable to employees, such as for a child over age 26, must be reported on the W-2, and that contributions employees make to flexible spending accounts are to be excluded from the health care cost figure.

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