October 15, 2010
W-2 Health Coverage Reporting Requirement Under the Affordable Care Act Delayed
On October 12, 2010, the Internal Revenue Service (IRS) released guidance stating that employers will not be required to report the aggregate cost of employer-sponsored health coverage on employees' W‑2 forms issued for 2011.1 This W‑2 reporting requirement was introduced by the Affordable Care Act.2 The IRS delayed the W‑2 reporting requirement to give employers more time to make necessary changes to their payroll systems.
The delay in reporting means that the cost of health coverage does not have to be provided for any W‑2 that reflects work performed in 2011, whether the W‑2 Form is provided during 2011 or 2012.
Draft W-2 Form Released
The IRS also released a draft W‑2 form, with a box to report the value of health coverage.3 However, employers are not required to use this form for coverage provided in 2011, although they have the option to do so.
Additional Guidance on W-2 Reporting Expected
The Treasury Department/IRS anticipate issuing additional guidance on the W‑2 reporting requirement by the end of this year.
Implications for Employers
The delay in the Form W‑2 requirement provides significant short-term relief to employers and to the community of service providers that prepare W-2 Forms.
This W‑2 reporting requirement is informational only — that is, an individual will be able to see the value of health care coverage provided by his or her employer, but will not be taxed on the value of that coverage.
The IRS has not yet issued guidance as to how to calculate the value of health care coverage. It is anticipated that the IRS will address issues regarding calculation of value, how rates for continuation of health coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) are used, what benefits are included, and how individual account plans, such as health reimbursement arrangements, are treated, when it provides guidance on W‑2 reporting later this year.
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- The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-148, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)
- The guidance, Notice 2010-69, is available on the IRS Web site. (Return to the Capital Checkup.)
- The draft W-2 form is available on the IRS Web site. (Return to the Capital Checkup.)
Capital Checkup is Sibson Consulting'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.