The Democrat-controlled Congress had to schedule a double-header lame duck session in November in part because Democrats punted on their responsibility to enact so many legislative items. However, when they did so, Democrats picked basically the same expiration date for most of these legislative items. So if you happen to be a C-SPAN junkie and intend to watch one or both of these scheduled lame duck sessions, don’t be surprised if you see a train wreck of sorts. However, a separate train wreck will occur at the end of January 2011, unless Congress steps in to save the day.
Tucked into the 2,000-plus-page-long health care bill is the requirement that all employers include health care valuations on the W-2 wage and tax form they must mail out to all employees. This new requirement kicks in this coming January.
What this entails is a bit sketchy right now since the IRS hasn’t issued any guidelines. So questions abound as to how any payroll office can comply with this new mandate. Some of the basic questions are:
— How does a payroll office determine the cost of the health insurance policy?
— Are administrative costs included in the reporting amount?
— What type of health reporting is required beyond major medical, dental and vision?
— What happens when health insurance plans change or are altered during “open enrollments,” which can occur mid-year?
— What about retirees who are covered by health plans but don’t receive a W-2?
Typically, a minor change for W-2 issuers requires at least six months to design, develop and implement. The changes that the Obama health care bill are mandating are especially complex in part because whatever health care information the IRS decides to include on W-2’s is not stored or easily available to a payroll system. The payroll office will have to contact a third party and garner the health insurance information and then merge it onto the W-2 form.
Finally, if the reports on this new mandate are true, then the IRS should communicate to the taxpayer that the new W-2 health care valuation will not result in the taxation of this value. Hum, if our health care insurance policy valuation isn’t ultimately going to be taxed, then why is it being added to our W-2 form?
Elizabeth B. Letchworth is a retired, elected United States Senate Secretary for the Majority and Minority. Currently she is a senior legislative adviser for Covington & Burling, LLC and is the founder of www GradeGov.com.