I just received a first draft copy of the new W-2 where the 2010 health care bill requires health insurance coverage to be posted. I will quote from the instructions. "Cost of employer-sponsored health coverage (if provided by the employer). The reporting in Box 12, using Code DD, of the employer-sponsored health coverage is for information only. The amount reported with New W-2 with Employer Paid Health Coverage Information explained. Code DD is not taxable." Thus, the entry on the W-2, if the employer properly uses Code DD in Box 12, assures the worker that the amount the employer paid is not taxable to the employee. The original instructions, which were removed from the IRS website a few months ago, read that the information was not taxable but the requirement of showing the information on W-2s for three years allows the government to know who has coverage paid by the employer. That, in 2014, the employers who do not have employer paid health insurance coverage for their employees will be fined on a monthly basis until they do cover their employees.
The other option, in 2014, is for the state run insurance pools to kick in. That instruction is gone and now it is replaced with this new "it is for information purposes only". It seems the Treasury Dept believes that the employee wants to know how much the employer is paying on their behalf for this tax-free fringe benefit. There is also a rule that goes along with this W-2 entry. The employers are supposed to provide to the IRS which employees are covered by the health insurance, with names, addresses, social security numbers and dates of birth of all family members who are covered by the insurance that is provided to the employee. The forms for that have not yet been printed but they should be out in 2011. This goes to the government so they will have a data base ready for the 2014 forced health insurance coverage. If you have any comments or questions, please post them below.