Nyemaster Goode, P.C.

IRS Notice on PPACA for Small Business Owners

By: Terry Hancock

The IRS recently issued Notice 2011-28, providing guidance (and further exemption for small business employers) on the requirement under the Patient Protection and Affordable Care Act (PPACA) to include the cost of employer provided health coverage (whether insured or self-insured) on W-2's of employees. As you recall, this requirement was previously waived for 2011 W-2's (issued in January, 2012).

Notice 2011-28 provides that employers that file less than 250 W-2's for 2011 will be exempt from the requirement at least until 2013 (for W-2's issued in January 2014) until further guidance is issued.

For other employers that must comply starting in 2012 (for W-2's issued in January, 2013), the "aggregate" cost of all "applicable employer sponsored" coverage must be reported. The cost that must be reported is the amount paid by the employer plus the amount paid by the employee for health coverage on a pre-tax or after-tax basis.

Any amounts paid for coverage by employer-provided flex credits should be included.

Amounts paid on a pre-tax basis by the employee through a flex spending account to cover unreimbursed medical expenses should not be included.

The cost of the following plans should not be included:

Stand-alone dental and vision plans.

Long-term care coverage.

Contributions to an HSA, Archer MSA or HRA.

HIPAA "excepted" benefits, such as accident, accidental death and dismemberment, disability, workers' compensation and auto medical payment insurance.

The costs reported are the costs for employee, spouse and dependent coverage and any imputed after-tax costs, such as domestic partner or same-sex spouse coverage.

The COBRA premium rate, less administrative charge, may be used.

The cost of coverage must be determined on a calendar year basis for W-2 reporting.

The aggregate employer cost is reported in Box 12, using Code DD, on the 2012 W-2.

If you have any questions, please contact your attorney.


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