Starting in tax year 2011, the federal Patient Protection and Affordable Care Act requires employers to report the value of the health insurance coverage they provide employees on each employee's annual Form W-2. However, to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with this requirement, the Internal Revenue Service (IRS) is deferring the reporting requirement until 2012, making that reporting by employers optional in 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. 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, see the IRS guidance.
