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IRS Defers Reporting of Employer-Provided Health Insurance Costs on Form W-2

November 02, 2010

Employers are eligible for a one-year deferral of mandatory reporting of the costs of employer-provided health insurance on an employee's Form W-2, Wage and Tax Statement.  According to the IRS, many employers need more time to make the necessary changes to their payroll systems to ensure accurate reporting.

Employers must provide each employee with a Form W-2 annually by January 31 of the following tax year.  For example, 2010 Forms W-2 must be provided to employees by January 31, 2011.

The Patient Protection and Affordable Care Act of 2010 (PPACA) adds more reporting requirements. The PPACA requires that the aggregate costs of employer-provided health insurance be reported on Forms W-2.

The reporting requirement will not be mandatory for Forms W-2 issued for the 2011 tax year.  The IRS will not impose penalties on an employer that fails to report the cost of employer-provided health insurance on Forms W-2 issued for 2011.

Aggregate cost
Employers must report the aggregate cost of employer-provided health insurance.  Aggregate cost means that an employee who, for example, has health, dental and eye insurance coverage is provided the total cost and is not given a breakdown of each type of coverage.  Reporting does not apply to the costs of long-term care, accident insurance, disability income insurance or indemnity insurance.

Information purposes
The IRS stressed that the amounts to be reported on Form W-2 are not taxable.  The new reporting requirement is intended to be for information purposes only and to provide employees with greater transparency into overall healthcare costs.

Revised Form W-2
The IRS must revise Form W-2 to reflect the new reporting requirement.  The IRS has posted a draft version of revised Form W-2 on its website.


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