We have received a number of questions from clients concerning the upcoming 2011 W-2 reporting requirement for the cost of coverage under an employer group health plan. Apparently, there is a lot of misinformation circulating on the internet warning employees about the increase in taxes they will incur when the cost of coverage is added to their W-2.

Since the IRS has decided to postpone the 2011 deadline for reporting group health plan costs on W-2's, we felt this would be a good opportunity to review the new law.

The IRS announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making it optional in 2011. The IRS has released a draft Form W-2 for 2011.

The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.

The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS will be publishing guidance on the new requirement later this year.

Although reporting the cost of coverage will be optional with respect to 2011, the IRS said it continues to stress that the amounts reportable are not taxable.
Included in the Patient Protection and Affordable Care Act passed by Congress in March, the new reporting requirement is intended to be informational only, and to provide employees with greater transparency into overall health care costs.