IRS Delays Form W-2 Reporting of Health Benefit Plan Value

Although we have devoted a great many inches in this blog to Health Care Reform, one thing we have not yet discussed is the legislation’s new requirements related to Form W-2 reporting.

The Affordable Care Act requires employers to report the cost of group health plan coverage on Forms W-2. This cost is meant to be determined under rules similar to the rules for determining the cost of COBRA coverage, minus the permissible 2 percent administrative cost assessment. Originally effective for Forms W-2 issued for 2011 (that is, in January 2012), last week the IRS issued new guidance delaying compliance with this requirement until January 1, 2012, for Forms W-2 issued in January 2013.

This relief should come as welcome news to employers, as they will now have additional time to modify their payroll systems and processes to address this new reporting requirement. For those employers wishing comply with the reporting requirement this year, the IRS has prepared a draft Form W-2 for 2011. The draft Form W-2 requires the cost information to be reported in Box 12, using Code DD. The draft Form also makes clear that the amount reported under this requirement is not taxable income.

The IRS expects to issue guidance on this new reporting requirement by the end of 2010.