IRS Announces Relief for Employers from W-2 Reporting of Health Plan Costs

The IRS announced today, October 12, 2010, that it will defer the health insurance reporting requirement for employers, making reporting by employers optional for 2011. The Affordable Care Act requires that the aggregate cost of employer-sponsored health coverage must be reported on a Form W-2.  For this purpose, the aggregate cost is to be determined under rules similar to the rules for COBRA continuation coverage.  This rule was to be effective for taxable years beginning on or after January 1, 2011, but will now be voluntary for 2011.

The IRS and Treasury Department decided this relief to be necessary to give employers time to make changes to their payroll systems or procedures to be compliant. The IRS announced it will be publishing guidance on this requirement later this year. The IRS also stressed that although amounts are to be reportable come 2012, the amounts reported are not taxable and are for informational purposes only.

The IRS announcement can be found at IR-2010-103.