Reporting Health Insurance Costs on the Form W-2

Many have expressed concerns about a provision in the massive healthcare legislation which required the cost of health insurance coverage to be reported on each employee’s Form W-2. Most of the concerns centered around the potential taxability of health coverage in the future. Currently, health coverage is a non-taxable fringe benefit. While trying to clarify that this was not a step towards taxing health insurance coverage, the healthcare bill required a reporting of the costs of health insurance by all employers, including churches and other non-profits, on their employees’ W-2 forms.

In the last few days, the Internal Revenue Service has issued interim guidance to employers on what they call “informational reporting” of the cost of the health insurance coverage. In addition, the IRS also is requesting comments on these interim guidelines. The IRS emphasized “that this new reporting to employees is for their information only, to inform them of the cost of their health coverage, and does not cause excludable employer-provided health coverage to become taxable; employer-provided health coverage continues to be excludable from an employee’s income, and is not taxable.”

As noted above, the Affordable Care Act – the healthcare legislation of 2010 – provided that employers must report the cost of employer-provided health care coverage on the Form W-2. Notice 2010-69, issued last fall, made this requirement optional for all employers for the 2011 Forms W-2 (generally furnished to employees in January 2012). In the most recent guidance, the IRS provided further relief for smaller employers (those filing fewer than 250 W-2 forms) by making this requirement optional for them at least through 2012 (i.e., for 2012 Forms W-2 that generally would be furnished to employees in January 2013) and continuing this optional treatment for smaller employers until further guidance is issued.

Using a question-and-answer format, the most recent guidelines (formally known as Notice 2011-28) also provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012. The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage.

Simply put, while the healthcare reporting requirement applies to churches, the most recent guidance from the Internal Revenue Service exempt churches (and other entities) from having to report such on their employees’ W-2 form if they have less than 250 employees. This exemption is granted on W-2’s issued through January 2013 – and most importantly, the IRS says the exemption will continue after January 2013 “until the issuance of further guidance.” When additional guidance is issued, we will attempt to make you aware of such.

About benefitsboard

Art Rhodes is the President and CEO of the Church of God Benefits Board, Inc. - the administrator of the Ministers' Retirement Plan and the Church Loan Fund, Inc. The corporate offices of the Benefits Board are in Cleveland, TN.
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