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  • W-2 Reporting Rules for Small Employer Groups Under PPACA

    One of the provisions of the PPACA law that is worrisome to small employer groups is the requirement that the cost of employer-sponsored group health plan coverage be included on an employee’s Form W-2.

    This requirement was originally scheduled to be effective for taxable years beginning on or after Jan, 1, 2011, however, the IRS granted a one year extension in late 2010 so that the requirement now applies beginning with the 2012 Forms W-2.

    While the general rule is that all employers that provide employer-sponsored group health plan coverage during a calendar year are subject to the enhanced Form W-2 reporting requirement, a limited exception now exists for small employers.

    Specifically, in the case of the 2012 Form W-2 (which must be delivered to employees on or before Jan. 31, 2013), an employer is not subject to the enhanced reporting requirement for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year.

    Consequently, if an employer files fewer than 250 2011 Forms W-2, the employer would not be subject to the enhanced reporting requirement for the 2012 Forms W-2.

    This exception will be very helpful to those employers that do not reach the 250 Forms W-2 threshold. In addition, while the exception specifically applies with respect to the 2012 Form W-2, the exception is available until the issuance of further guidance.

    Therefore, it is possible that this exception will be extended into later taxable years.

    In any event, the earliest that such small employers would be required to comply is the 2013 Forms W-2 in January 2014. While the exception applies with respect to the 2012 Forms W-2, the determination of whether the 250 Form W-2 threshold has been reached is based on the prior year (i.e., 2011).

    However, it is important that employers who may be eligible for this small employer exception in 2012 are aware of the exception throughout 2011.

    Guidance on implementation is available in the IRS notice 2011-28 avaiable onthe IRS website.  Employers should consult with their employee benefits counsel and tax advisors to determine the impact that this guidance will have on their reporting obligations.

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