The Patient Protection and Affordable Care Act at first required that employers’ costs for employer-sponsored health coverage provided to an employee be reported on the employee’s Form W-2, for informational purposes, effective for Jan. 1, 2011. That just changed.

The IRS has now issued Notice 2010-69 providing that this new reporting requirement will not be mandatory for Forms W-2 issued for 2011. As a result, employers won’t be subject to penalties for not reporting health-coverage costs on employees’ Forms W-2 for 2011 compensation, unless the cost is in the category of taxable income to the employee.

The IRS also released a preliminary draft of the 2011 Form W-2. The new form will make it clear that the employer can list the cost but is not required to do so.

Forms W-2 that will be filed for 2010 compensation are not affected, and you’re not required to include any information regarding nontaxable cost of employer-provided health coverage.

Expect the IRS to provide more guidance on this reporting requirement sometime before the end of this year, so that employers can adjust payroll systems.