Tax

BKD’s 2010 Year-End Tax Issue noted employer-sponsored health insurance coverage reporting was made optional for IRS 2011 Forms W-2, generally furnished to employees in January 2012. Notice 2011-28, issued March 29, 2011, has extended this relief for smaller employers (those required to file fewer than 250 2011 Forms W-2) to 2012 Forms W-2, generally furnished to employees in January 2013.

The notice also provides reporting guidance to employers voluntarily choosing to report the cost of coverage on 2011 Forms W-2, as well as employers required to report the cost of coverage on 2012 Forms W-2. Employer-sponsored health insurance coverage is defined, with respect to any employee, as the coverage under any group health plan made available to an employee by an employer that is excludable from the employee’s gross income.

The reporting requirement for the cost of employer-sponsored coverage does not apply to any of the following:

1. Amounts contributed by an employer to any Archer medical savings account or health savings account of an employee or an employee’s spouse
2. Any salary reduction contributions to a flexible spending arrangement
3. Cost of coverage under a Health Reimbursement Arrangement
4. Cost of employer-sponsored health insurance coverage for a terminated employee, if such employee requests to receive his or her Form W-2 prior to the end of the calendar year during which the employee terminated employment
5. Cost of employer-sponsored health insurance coverage contributed to a multiemployer plan by an employer for an employee
6. Dental or vision plan coverage, if such plan is not integrated into a group health plan providing additional health care coverage
7. Self-insured group health plan coverage not subject to any federal continuation coverage requirement, e.g., the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

Please note, the reporting of employer-sponsored health insurance coverage is for informational purposes only and does not cause excludable employer-provided health coverage to become taxable.

For the full text of Notice 2011-28, including the question-and-answer guidance provided by the IRS, visit the IRS webpage related to the topic. For more on how this guidance affects your business, contact your BKD advisor.