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Immediate Action Required Under Health Care Reform: IRS Form W-2 Reporting of "Aggregate Cost"

November 13, 2012

The Patient Protection and Affordable Care Act of 2010 (the “Act”) requires employers, for the first time, to report on IRS Form W-2 the “aggregate cost” of “applicable employer-sponsored health care coverage.” Any employer that issued at least 250 IRS Form W-2s for wages paid in calendar year 2011 must comply with this reporting requirement when it issues its 2012 IRS Form W-2s in January 2013. Any employer that did not reach the 250-Form mark for 2011 has the option of complying for 2012. This exemption applies until further notice.

IRS guidance issued earlier this year (IRS Notice 2012-9) describes what is meant by “aggregate cost,” how to compute “aggregate cost” and what types of health care coverage qualify as “applicable employer-sponsored health care coverage.” Suffice it to say that the rules set forth in IRS Notice 2012-9 are complex, with numerous exceptions and options. However, the main points can be summarized as follows:

  • Medical and prescription drug plans, employer flex credit health care flexible spending accounts, and dental and vision plans (if provided under a medical plan) must have their costs reported;
  • Long-term care, accidental death and dismemberment and employee deferral-based health care flexible spending account plans need not have their costs reported;
  • Special reporting rules apply in the case of employee assistance programs, wellness programs and on-site medical clinics;
  • Special reporting rules apply to “split plans” (i.e., plans in which medical benefits constitute a portion of total benefits);
  • “Aggregate cost” includes both the employer and employee premium costs, whether paid with pre-tax or after-tax dollars;
  • An employer generally may choose from among several different computational methods to report “aggregate cost”; and
  • Reporting does not equate to taxability – discriminatory health coverage can make benefits taxable to certain employees.

For further information and assistance in complying with this new Form W-2 reporting requirement, please contact:
Adam B. Cantor
Member of the Firm (Chair, Employee Benefits) | (973) 530-2020 | acantor@wolffsamson.com  
David M. Hyman
Member of the Firm (Health Care) | (973) 530-2009 | dhyman@wolffsamson.com
Catherine P. Wells
Member of the Firm (Chair, Employment) | (973) 530-2051 | cwells@wolffsamson.com  
Margaret O’Rourke Wood
Member of the Firm (Employment) | (973) 530-2063 | mwood@wolffsamson.com  
Nicole DiMaria
Member of the Firm (Health Care) | (973) 530-2111 | ndimaria@wolffsamson.com  
Denise J. Pipersburgh
Associate (Employment) | (973) 530-2090 | dpipersburgh@wolffsamson.com 
William J. Cannici Jr.
Associate (Health Care) | (973) 530-2183 | wcannici@wolffsamson.com