W-2 Reporting Requirement for Group Health Coverage Delayed

Hidden within the Patient Protection and Affordable Care Act of 2010 (PPACA) is a requirement for all employers to report the cost of employer-sponsored group health coverage on the W-2 form for all employees.  The IRS announced last week that this reporting requirement has been delayed.  The original reporting requirement was for income reported on the 2011 W-2 (sent to employees in January 2012).  The original reporting would have required all employers to have a process in place by January 1, 2011 (2+ months from now) to track all of the aggregate costs of employer-sponsored health coverage.

The IRS and the Treasury Department determined that the delay will provide employers with additional time to make any necessary changes to their payroll systems or procedures.

The delay only forestalls the inevitable.  Employers will need to coordinate with their HR and payroll service to 1) identify each of the benefit costs that need to be tracked, 2) develop  a process within your payroll system to accurately account for the costs for each employee’s benefits, and 3) test this process during the last part of 2011 to be sure the system is working.

The IRS stated the W-2 reporting of benefits is intended for informational purposes only to provide employees with greater transparency into overall health costs, and that the amounts reportable are not taxable.  Many employers have been providing employees with Benefits Statements (the hidden paycheck) for years on a voluntary basis without government requirements.  PPACA also has a requirement for employers to complete 1099’s for every business expense over $600 a year.  This is scheduled to start in 2012.

Stay tuned as the details and reporting requirements under PPACA unfold.  Our “educated guess” is that many of these reporting requirements will come under greater scrutiny by the new Congress and there may be a more employer-friendly approach to this process.   We will keep you current on any new developments.

Frazier International sends the HR Alert to our business clients and colleagues to keep you informed of the latest developments in the Human Resource world.  Please feel free to contact us if you have any questions about this latest HR Alert, or if we can assist you in any way with your Human Resource needs.

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