As you may know, IRC 6051(a)(14), which was added to the Internal Revenue Service Code by 9002 of the Patient Protection and Affordable Care Act (Health Care Act, P.L. 111-148) generally provides that the “aggregate cost” of employer-sponsored health insurance coverage must be reported on employee W-2s beginning with the 2011 tax year (filed in 2012).  For this purpose, “aggregate cost” is determined under rules similar to the rules in IRC 4980(f)(4) that refer to the definition of “applicable premium” with respect to COBRA continuation coverage.  The information is to be reported in Box 12 of Form W-2, using coded “DD”.

The IRS has recently announced that it will NOT require employers to include the “aggregate cost” of employer-sponsored health insurance coverage on employee W-2s for the 2011 tax year.  Reporting this information on the 2011 Forms W-2 will be optional. Employers taking advantage of the reprieve will not be treated as having failed to meet the IRC 6051 wage and tax statement reporting requirements or be subject to any penalties [ Notice 2010-69, 2010-44 IRB].

The IRS now says that the reporting requirement in IRC 6051(a)(14)  is not mandatory for 2011 Forms W-2.  The Treasury Department and the IRS have determined that this relief is necessary to provide employers with more time to make changes to their payroll systems or procedures to comply with the new reporting requirement.  The IRS will be publishing guidance on the new requirement later this year [ IR 2010-103 ].

The IRS has also released a draft version of 2011 Form W-2.  The “Notice to Employee” (on back of Copy B of Form W-2) states that “the reporting in Box 12, using Code DD of the cost of employer sponsored health coverage is for information purposes only.  The amount reported with Code DD is not taxable.”