W-2 Changes Required by Health Care Reform

September 27th, 2010

Health Care Reform has instituted new Form W-2 reporting requirements for employers to disclose the “aggregate cost” of all “applicable employer-sponsored coverage.” Employers should report this information for the 2011 tax year on the employee’s Form W-2, typically issued in January 2012. The Internal Revenue Service will be issuing a revised Form W-2 and instructions to accommodate this requirement.

It is expected that the IRS will require that amounts of premium paid by the employer and employee must be included on the W-2. Premiums paid for health insurance are to be included as well as dental and vision coverage in some circumstances but not life, disability or workers compensation coverage.

Amounts reported for 2011 will NOT be taxable income to employees. However, this change puts in place a mechanism to allow such taxation when the provisions for taxation of higher-cost “Cadillac” benefit plans take effect in 2018.

We are waiting for specific IRS guidance. In the meantime, please see the Alliant Compliance Alert for more information, especially about what is excluded from the new reporting requirements.