April 8, 2011
Interim Guidance on Form W-2
~ written by Char Sutek, Willis, Employee Benefits
The Internal Revenue Service issued interim guidance recently (Notice 2011-28) regarding the requirement that employers report the cost of employer-sponsored health insurance coverage on Form W-2.
The health care reform law included a requirement that employers report the value of the health coverage that they provide to employees on the W-2s that they issue to employees. That requirement was originally scheduled to become effective for W-2s reporting pay during 2011 (i.e., the W-2s that generally will be issued in January 2012). Last October, however, the IRS announced that W-2s issued for 2011 (the ones generally due in January 2012) do not need to include the cost of health coverage provided by the employer during the year. Reporting those amounts is optional for coverage provided during 2011.
W-2 reporting of health coverage remains optional for coverage provided during 2011. For coverage provided during 2012, the new guidance specifies that W-2 reporting will remain optional for smaller employers (those filing fewer that 250 W-2s). For larger employers (and those who choose to report voluntarily), the guidance provides details on what coverage must be reported and how to determine the cost of that coverage. Willis’s National Legal & Research Group will explain those details in a future publication.
The IRS emphasized in its new guidance that nothing in the W-2 reporting requirement or any guidance relating to it has or will cause health coverage that employers provide to employees and their dependents to become taxable. Such coverage generally continues to be excludable from an employee's income. The guidance explains that this reporting requirement was intended “to provide useful and comparable consumer information to employees on the cost of their health care coverage.”