As your benefits broker, The McCart Group feels that it is important to notify you of upcoming changes to W-2 Reporting Requirements that will affect your organization if you have more than 250 W-2s for 2011 (not number of employees, but number of W-2s). 

Employers with more than 250 W-2s for 2011 should be prepared to report health plan premium on the 2012 Form W-2 in box 12 using the code 'DD'.

To "prepare," The McCart Group's recommended best practice is for clients to request that their payroll provider set up a memo code on their payroll system such that this health plan premium amount can be "accumulated" per payroll.  At the end of the year, a report can be pulled and/or the payroll vendor will already have the data to populate the W-2.   

Otherwise, the client will be facing a special project situation where the health plan cost for each employee will have to be calculated based on the amount of time they were actually in the plan.

No employers are required to include the reporting for tax year 2011, regardless of how many W-2s they have filed in the past. It is optional, but only for 2011. 

The delay for the reporting requirement that applies to small employers depends on how many W-2s the firm files for the 2011 tax year. A firm will not know that until the tax year is over. 

• Firms that file less than 250 W-2s for the 2011 tax year are not required to report until the 2013 tax year (W-2s that are sent in early 2014)
• Firms that file 250 or more W-2s for the 2011 tax year must begin to report for the 2012 tax year (W-2s that are sent in early 2013)

Excluded from the new reporting requirement are contributions to HSAs, employee contributions to FSAs and the costs for items like Long Term Care insurance and stand-alone dental and vision coverages.

The IRS emphasizes that what must be reported includes both employer and employee contributions to major medical insurance premiums. 

To be sure, PPACA mandated W-2 reporting is for information purposes only. As the IRS puts it, "nothing about the reporting requirement causes or will cause excludable employer-provided health coverage to become taxable." The idea is to inform employees about the true cost of their health coverage.

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As more details of the Patient Protection and Affordable Care Act (PPACA) emerge, The McCart Group will update you on selected provisions that affect employers and employer-sponsored group health plans.