Form W-2 Reporting of Health Care Costs Delayed until 2012

By Marcia Richards Suelzer, Toolkit Staff Writer

The regulatory burden on small business owners has been rising lately. But the IRS has one bit of good news.

Employers will not have to report the total value of the employee's health insurance coverage on each employee's Form W-2 until 2012. This requirement, enacted as part of the Affordable Health Care Act, was scheduled to start for Forms W-2 issued for 2011.

However, the IRS deferred the requirement until 2012 so that employers can have additional time to make any necessary changes to their payroll systems or procedures. An employer has the option of reporting these payments starting in 2011. The 2011 Form W-2 will include the codes that employers may use to report the cost of coverage under an employer-sponsored group plan, if they want to begin reporting in 2011.

• Think Ahead. The required reporting of health care costs may affect you as early as January, 2012. In most cases, you must issue your employees their W-2 forms by January 31 for the wages earned in the proceeding year—January 31, 2013 for wages earned in 2012. However, a terminated employee has the right to request his or her Form W-2 upon termination and the employer must provide the form within 30 days. Therefore, you must be prepared to issue Forms W-2 that provide heath insurance information by January 31, 2012.

This reporting is purely for informational purposes—the goal is to allow employees to see the value of the coverage. Disclosing the amount does not affect the employee's liability because the cost of employer-provided health care is excludible from income.

It also provides a framework that will allow the IRS to monitor compliance with coverage mandates for large employers that go into effect in 2014. Further down the road, knowing the aggregate value of the employee's heath coverage will help employers take steps to avoid the excise taxes on "Cadillac plans" that are scheduled to hit in 2018.

Posted October 14, 2010.