By Mary Ellen Schill
October 25, 2010
Prior to the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010 (“Health Care Reform”), employers were not required to report on an employee’s Form W-2 information about the cost of employer-sponsored health coverage. Health Care Reform added the requirement that such information must be reported on the employee’s Form W-2, beginning with the 2011 tax year.
In order to give employers more time to make changes to their payroll systems and procedures to comply with the new health care cost reporting requirement, the IRS and Treasury Department have recently announced in Notice 2010-69 that this obligation will be optional for 2011. The IRS Notice explains that employers will not be required to report the cost of employer-provided health coverage for 2011, and will therefore not be penalized for failing to meet this requirement when 2011 Forms W-2 are issued.
The IRS also released a 2011 draft Form W-2, which includes codes for employers to use when reporting the cost of employer-sponsored health coverage. According to the draft, employers will use Code DD in Box 12 to report the cost of such coverage. The draft is also careful to stress that the amount reported is for informational purposes only and is not taxable.
This relief from W-2 reporting is particularly important in light of the increased W-2 penalties that become effective next year. Employers and the payroll industry now have much needed time to begin to work through the numerous issues and make the necessary system changes.
If you have questions regarding the above, please contact Mary Ellen Schill, the author of this article, or any of the attorneys in the Employment, Benefits & Labor Relations Practice Group of Ruder Ware.
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