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Health Care Reform Update: New W-2 Requirements

May 22, 2010

By Scott Lyon, health insurance expert for the Small Business Association of Michigan (SBAM)

I recently wrote about new requirements in the health care law regarding 1099-MISC reporting. Today there is news about W-2s. If you have employees, then you also have some new rules to think about.

The new law requires employers to calculate and report the aggregate cost of employer sponsored health insurance plans on employee’s W-2 beginning on Jan. 1, 2011. While most W-2s will be issued in early 2012 for the tax year 2011, your payroll system must be updated no later than Feb. 1, 2011 in case someone leaves your employ and requests a W-2 early.

What must be included in the calculation? It must include

  • Medical Plans
  • Prescription Plans
  • Medicare Supplement Plans
  • Employee Assistance Plans
  • Costs for on-site clinics or executive physicals
  • Dental and Vision plans (unless they are stand alone plans)

Health Savings Account and Flexible Spending Accounts for Health are not included, nor are any costs for specific disease or hospital/fixed indemnity style plans.

While the regulations are not yet out, the laws seems to require that you have these costs calculated on a monthly basis. Also, the reports are required for employees, but they are also required for former employees who are provided health coverage (think COBRA, early retirees, surviving spouse, etc.). If you have anyone that falls into these categories, they may not have previously needed a W-2 because maybe they didn’t earn any wages in the tax year. But going forward you will apparently need to generate a W-2 for them.

Again the regulations are not yet written, but, I am pretty sure I am right. Between now and the end of the year, make sure your payroll administrator and/or payroll staff is up to speed and ready for the new requirement.

(Use the social networking links at the bottom of this story to forward to your friends and colleagues.)

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