On March 29, 2011, the IRS issued Notice 2011-28 to employers regarding the information reporting requirements on each employee's annual Form W-2 of Health insurance coverage. This new reporting to employees is for informational purposes only. It is to inform employees of the cost of their health care coverage. Furthermore, the IRS has stressed that employer-provided health care coverage continues to be excludable from an employee's income, and is therefore not taxable.
The PPACA (Patient Protection and Affordable Care Act), which was enacted in March of 2010, ensures that employers must report the cost of health care coverage on the Form W-2.
Helpful to Small Employers
With the new guidelines, the IRS provided additional relief for small businesses (filing fewer than 250 W-2 forms) by making the requirement voluntary for them at least in tax year 2012. The optional treatment for smaller employers will remain in effect until further IRS guidelines are issued.
Opportunity for Benefits Communications
Employers can utilize health care reform as a chance to better communicate with employees regarding their health and wellness benefits. The new requirements will help employees gain a better understanding of the cost, and value, of their coverage. Many employees are going to be surprised at the cost of their health care benefits, and employers can use this opportunity to open a discussion about health care cost containment. They can also emphasize the investment the company makes in each employee in the form of benefits.