Friday, September 3, 2010

Health Care Reform Legislation Requires that W-2s Show Value of Health Coverage

Thanks to the health care reform legislation, employers are required to report the value of the health insurance coverage they provide on each employee’s annual Form W-2 beginning in tax year 2011.

This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers, according to the IRS.

There has been considerable confusion generated concerning the reporting of the value of health insurance coverage—with rumors spread that the amount is taxable for income tax purposes. To be clear, the amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee's income and it is not taxable. For more information:,,id=220809,00.html?portlet=6

It might appear that this additional reporting requirement does not impact nonprofits until January 2012 when the 2011 Form W-2s must be filed. However, departing workers can ask for a W-2 within 30 days of the final paycheck or the date the request is made, whichever is later. Even though few people do this, charities will need to be ready in early 2011. The calculation of the health plan’s value is the same as the value used to figure the allowable premium for COBRA coverage.

Preparedness to comply with these new government regulations is the key.