W-2 Reporting of Health Insurance Coverage Delayed

The 2010 health care law imposed a new reporting obligation on employers, to report the aggregate cost of employer-provided health insurance on their employees' W-2s.  This reporting is informational only; not an increase in taxable wages.  The original due date of this reporting obligation began January 1, 2011.  In IRS Notice 2010-69, the IRS made this reporting "optional" for all employers for 2011 W-2s.  Now, in new IRS Notice 2011-28, the IRS extends this voluntary reporting for small employers (those issuing fewer than 250 Forms W-2 for 2011) through 2012.

The aggregate cost to be reported includes both the portion of the premium paid by the employee and the employer, regardless of whether the employee's contributions were made on a pre-tax or an after-tax basis.  However, the aggregate cost does not include contributions to an Archer MSA, Health Savings Account, or a flexible spending arrangement.  Many other special rules exist and reference should be made to IRS guidance for the details.

UPDATE:
IRS Notice 2012-9 extends the exception from reporting employer paid health costs on W-2s for small employers to future tax years beyond 2012 until further guidance is issued by the IRS.