July 19, 2011

IRS Guidance on Form W-2 Reporting under the Affordable Care Act Addresses Multiemployer Plan Coverage

Update: In January 2012 the IRS released Notice 2012-9, which restates, amends and supersedes Notice 2011-28 (discussed in this Capital Checkup). Notice 2012-9 provides no further guidance about multiemployer plans, and does not change the transition period for employers who contribute to multiemployer plans. However, it does include the following key changes and clarifications:

  • The cost of on-site medical clinics, employee assistance programs and wellness programs do not have to be reported unless they are part of the group health plan and the plan charges a COBRA premium for these benefits.
  • The cost of dental and vision benefits do not have to be reported if they qualify as “excepted benefits” under HIPAA. Dental and vision benefits qualify as “excepted” under HIPAA if: (1) they are separately insured; or (2) they are self-insured but participants elect the coverage separately from medical coverage and they pay an additional premium (even a nominal one) if they elect dental or vision coverage.

The Affordable Care Act1 requires employers to report the aggregate cost of employer-sponsored health coverage on employees’ W-2 forms. (This reporting requirement differs from the Affordable Care Act’s 1099 reporting requirement, as noted in the box at the end of this issue.) The Internal Revenue Service (IRS) has released Notice 2011-28, which provides interim guidance on how employers report this information on the Form W-2.2 The guidance grants a delayed effective date for reporting, contains information on how the value of health coverage is calculated, and allows transitional relief for certain employers, including those that contribute to multiemployer plans, from the reporting obligations.

Notice 2011-28 provides interim guidance, which is generally applicable to the Form W-2 filed in January 2013, with respect to work performed in 2012. (As noted in the next section, no W-2 reporting of the cost of health coverage is required for coverage provided in 2011.) While the IRS may issue further guidance, it would apply prospectively only, and not to any calendar year beginning within six months of the date the guidance is issued.

The purpose of the W-2 reporting is informational. Notice 2011-28 describes the purpose as to provide useful and comparable consumer information to employees on the cost of their health care coverage. The taxation of the value of health coverage to the employee is unchanged from existing law.


In October 2010, the IRS published Notice 2010-69, in which the W-2 reporting requirement was delayed in order to give employers more time to make necessary changes to their payroll systems. That delay in reporting meant that the cost of health coverage did not have to be provided for any W-2 that reflected work performed in 2011, whether the W-2 Form is provided during 2011 or 2012.

Notice 2011-28 clarifies the delay in the W-2 reporting requirement and captures many of the details that employers will need to comply with the new requirement.

Employers that Contribute to Multiemployer Plans Temporarily Exempt from the W-2 Reporting Requirement

Notice 2011-28 creates a transition rule that makes an exception from the W-2 reporting requirement for certain employers and certain types of coverage. Notably, employers that contribute to multiemployer plans are among these temporarily exempt employers. Employers and benefits covered by the transition rule include the following:

  • Employers that contribute to multiemployer plans (with respect to the coverage provided under the multiemployer plan),
  • Employers filing fewer than 250 Forms W-2 for the 2011 calendar year,
  • Health Reimbursement Arrangements (HRAs),
  • Dental and vision plans that are not integrated into a group health plan,3 and
  • Self-insured plans of employers not subject to continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) or similar federal requirements (e.g., employers with fewer than 20 employees).

Reporting for these employers and with respect to these types of coverage is not required until future guidance is provided, and in no event will reporting by these employers with respect to these types of coverage be required on any Forms W-2 furnished to employees before January 2014.

Types of Coverage Generally Subject to the New Requirement

Employers are generally required to report on the Form W-2 the total cost of all applicable employer-sponsored health coverage provided to an employee. Generally, any coverage under a group health plan that is provided to the employee on a tax-free basis would need to be included. However, the Affordable Care Act makes an exception from the reporting requirement for certain types of coverage, including the following:

  • Long-term care benefits,
  • Coverage under a separate policy, certificate or contract of insurance which provides benefits substantially all of which are for treatment of the mouth (including any organ or structure within the mouth) or for treatment of the eye (i.e., separately insured dental or vision benefits),
  • Coverage only for a specified disease or illness and hospital indemnity or other fixed indemnity insurance, if the employee pays the premiums for the coverage on an after-tax basis, and
  • Coverage for certain “excepted benefits” under the Health Insurance Portability and Accountability Act (HIPAA) listed in the table below.
HIPAA "Excepted Benefits"

The following benefits are "excepted benefits" under HIPAA:

  • Coverage only for accident, or disability income insurance, or any combination of these coverages,
  • Supplemental liability insurance,
  • Liability insurance (including general liability insurance and automobile liability insurance),
  • Workers’ compensation or similar insurance,
  • Automobile medical payment insurance,
  • Credit-only insurance, and
  • Other similar insurance coverage specified in regulations, if the benefits for medical care are secondary or incidental to other insurance benefits.


Because retirees are not employees and would not receive a Form W-2, there is no obligation to report the value of health coverage to a retired employee. Similarly, those participants who are receiving coverage because of COBRA eligibility would not be required to receive a Form W-2, unless they are otherwise entitled to one.

Notably, coverage for on-site medical clinics must be reported. Moreover, if the dental and vision plans are integrated with the medical plan then they must also be reported.4

Amount to be Reported

The Notice specifies that the amount to be reported must include both the portion paid by the employer and the portion paid by the employee. Generally, an employer may use a COBRA premium to calculate the value of coverage to be reported. If the health plan is insured, an employer may use the premium charged by the insurer for that employee’s coverage (for example, for single-only coverage or for family coverage, as applicable to the employee) as the reportable cost.

The amount is reported on the Form W-2 in a new Box 12, and is identified by code DD.

Implications for Multiemployer Health Plans

Sponsors of multiemployer plans can take a wait-and-see approach as these plans’ contributing employers will not have to comply with the W-2 reporting requirement until further guidance is issued.

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As with all issues involving the interpretation or application of laws and regulations, sponsors of group health plans should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related regulations. The Segal Company can be retained to work with plan sponsors and their fund counsel on compliance issues.

Reminder: Affordable Care Act's 1099 Reporting Requirement Repealed Earlier this Year

In addition to introducing a W-2 reporting requirement for the value of health care coverage, the Affordable Care Act amended the tax-reporting requirements by expanding the Form 1099 reporting requirement. The Form 1099 reporting requirement, which is not related to the W-2 reporting requirement or to health care coverage, is a longstanding rule that requires the reporting of certain payments to any individual that total $600 or more in a taxable year. Earlier this year, President Obama signed a law that repealed the Affordable Care Act’s expansion of the Form 1099 reporting requirement.

* For more information about that law, see Segal's April 18, 2011 Capital Checkup, "Repeal of the Affordable Care Act's 1099 Reporting Requirement and Changes in the Subsidies Available to Individuals in 2014.
The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)
Notice 2011-28 is available on the IRS website. (Return to the Capital Checkup.)
For more information on the implications of the Affordable Care Act for dental and vision plans, see The Segal Company’s December 2010 Health Care Reform Insights. (Return to the Capital Checkup.)
For more information on the rules for dental and vision plans that are integrated with the medical plan, see Segal’s December 2010 Health Care Reform Insights. (Return to the Capital Checkup.)

Capital Checkup is The Segal Company's periodic electronic newsletter summarizing activity in Washington with respect to health care and related subjects. Capital Checkup is for informational purposes only. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.


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