Notice 2012-9: Restated Guidance on W-2 Reporting

Summary of IRS Notice 2012-9

The IRS has restated and amended the interim guidance on informational reporting to employees of the cost of their employer-sponsored group health plan coverage initially provided in Notice 2011-28.  Notice 2012-9 supersedes Notice 2011-28 and makes the following changes to the guidance provided in Notice 2011-28:

Click on the links in the text below to go to the section referenced in Notice 2012-9

• Modifies Q&A-3 to provide that until further guidance is issued, the reporting requirement will not apply to tribally chartered corporations wholly owned by Federally recognized Indian tribal governments.
• Modifies Q&A-3 to clarify the application of the interim relief from the reporting requirement for employers filing fewer than 250 Forms W-2 for the preceding calendar year.
• Modifies Q&A-7 to clarify the application of the reporting requirement to certain related employers not using a common paymaster.
• Adds a new example to Q&A-19 that demonstrates that the reporting requirement does not apply to coverage under a health flexible spending arrangement (FSA) if contributions occur only through employee salary reduction elections.
• Modifies Q&A-20 to clarify that the standard for determining whether coverage under a dental plan or vision plan is subject to the reporting requirement is based upon the same standard for determining whether the coverage is subject to the rules set forth in the regulations under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
• Modifies and corrects Q&A-23 to clarify that the reporting requirement does not apply to the cost of coverage includible in income under § 105(h), or payments or reimbursements of health insurance premiums for a 2% shareholder-employee of an S corporation who is required to include the premium payments in gross income.
• Modifies Q&A-28 to clarify the application of the reporting requirement if a composite rate is used with respect to the premium charged active participants, but not the premium charged under COBRA to a qualifying beneficiary.

The notice also provides the following additional guidance through new Q&A’s:

• Provides that employers are not required to include the cost of coverage under an employee assistance program (EAP), wellness program, or on-site medical clinic in the reportable amount if the employer does not charge a premium with respect to that type of coverage provided under COBRA to a qualifying beneficiary (Q&A-32).
• Clarifies that employers may include the cost of coverage under programs not required to be included under applicable interim relief, such as the cost of coverage under a Health Reimbursement Arrangement (HRA) (Q&A-33).
• Clarifies how to calculate the reportable amount for coverage only a portion of which constitutes coverage under a group health plan (Q&A-34).
• Clarifies how to calculate the reportable amount if an employer is provided notice after December 31 of a calendar year of events that occurred on or before December 31 of a calendar year that affect the prior year’s coverage, such as an employee providing an employer notice of a divorce or other change in family status that occurred during a prior calendar year (Q&A-35).
• Clarifies how to calculate the reportable amount where coverage extends over the payroll period including December 31 (Q&A-36).
• Clarifies the application of the exception for certain hospital indemnity or other fixed indemnity insurance offered by an employer on an after-tax basis (Q&A-37 and Q&A-38).
• Provides that the reportable amount is not required to be included on a Form W-2 provided by a third-party sick pay provider (Q&A-39).

The reporting is intended to inform employees of the cost of their health care coverage, and does not cause excludable employer-provided health care coverage to become taxable. This notice provides interim guidance that generally is applicable beginning with 2012 Forms W-2 (that is, the forms required for the calendar year 2012 that employers are generally required to give employees by the end of January 2013 and then file with the SSA).

Transition Relief 

As explained above, this notice provides transition relief for certain employers and with respect to certain types of employer-sponsored coverage.  This transition relief will be available at least for 2012 Forms W-2 and the availability of this transition relief for 2012 Forms W-2 will not be affected by the issuance of any further guidance.  Thus, reporting by employers and with respect to the types of coverage covered by the exceptions provided in this notice will not be required for 2012 Forms W-2.  For example, as provided in Q&A-3 of this notice, employers that are required to file fewer than 250 2011. Forms W-2 will not be subject to the reporting requirement for 2012 Forms W-2.

 Interim Guidance

The interim guidance is set forth in section III of this notice.  Q&A-1 and Q&A-2 discuss the general requirements.  Q&A-3 identifies the employers subject to the reporting requirements.  Q&A-4 through Q&A-10 provide the methods for reporting the cost of the coverage on the Form W-2.  Q&A-11 through Q&A-15 define certain terms related to the cost of coverage required to be reported on the Form W-2.  Q&A-16 through Q&A-23 set forth the types of coverage the cost of which is required to be included in the amount reported on the Form W-2.  Q&A-24 through Q&A-27 describe several calculation methods that may be used to determine the cost of the coverage.  Q&A-28 through Q&A-31 address a number of other issues employers may encounter in determining the cost of the coverage.  Q&A-32 through Q&A-38 contain additions to the guidance initially set forth in Notice 2011-28.  Section IV of this notice contains transition relief for certain employers and with respect to certain types of employer-sponsored coverage.  Section V of this notice states that Notice 2011-28 is superseded.