By Tony Wilson
As we continue to dissect the various aspects of Health Care Reform and how the multiple requirements of the law will impact you as well as employers, this week we are going to offer an opinion on the W-2 reporting requirement.
In last week's column, we touched on the topic of employers who issue 250 or more W-2s being required by the law to include (in Box 12, code DD) the aggregate value of health coverage provided to employees for purposes of reporting on 2012 W-2s (those generally issued in January).
The sound you hear in the background is a chorus of business choirs giving thanks that employers who issue less that 250 W-2s are not subject to the reporting requirement, at least at this time.
While some exclusions apply, the aggregate cost of health coverage that must be reported includes major medical, employer contributions to a health Flexible Spending Account (FSA), retiree coverage (unless no W-2 is issued) and certain Employee Assistance Programs (EAPs) and fixed dollar coverages.
So, we know who has to report, and we know what has to be reported. A hugely debated question is why it has to be reported.
Some supporters of the law say it is simply to inform employees of the actual total cost of their employer-sponsored health insurance coverage. Others contend that while not currently taxable, if the federal government has access to this information it would be very easy to start taxing these benefits, especially if the government realizes the "lost revenue," which we will touch on a little later.
If the true goal of this piece of the law is to notify employees of the cost of their coverage this could easily be done in a number of ways. I have clients who for years have notified employees of the full cost of coverage through annual benefit statements.
In today's age of electronic communication, wouldn't a blast email to "all company users" about the costs be more cost effective? This would create an electronic "paper" trail to show those individuals were notified. What if we required each employee to stop by HR, pick up a cost outline and then sign a statement saying they were provided, in writing, with the annual costs?
Employers are required to display posters of the minimum wage and the worker's comp panel in prominent places. Why can't employers display notices about the cost of the health insurance coverage in a similar fashion?
Hey, Washington, I just outlined several cost-saving measures that get the word out to employees quickly and efficiently. Don't worry, I'm not even going to charge you.
What I do have a great concern about is the method of this required reporting -- the W-2.
Why does the federal government need this information reported on an earnings document used for taxation purposes (W-2) if the data in Box 12 is for "educational" purposes only?
In a recent New York Times article, the Obama Administration was credited as noting the government is "losing" an estimated $180 billion in revenue through the tax-free treatment of employer-sponsored coverage. Is it unreasonable to think that some leaders of a nation facing $16 trillion of debt might be interested in using the W-2 reporting mechanism to more closely gauge the actual cost of the "lost revenue" with other motives in mind?
One of the stated goals of Health Care Reform is to cut costs. Consider for a moment the huge cost to businesses to redesign payroll systems to accommodate this reporting change on the W-2. Maybe I should have paid better attention in that computer programming class at UGA.
Many employers absorb certain costs when and where necessary, but at some point those costs will be passed along through the chain. Increased costs to do business coupled with increases in utility costs and additional taxes can mean the pass-along could come in the form of higher prices, but it also could come in the form of no raises for employees this year, delayed or complete hiring freezes or, worse, layoffs.
Unlike Washington which seems to think the cherry trees along the Potomac produce money instead of blossoms, employers we work with locally certainly understand the pit of money has a rock-hard bottom. And it is certainly more shallow than Washington seems to believe.
Listing this information on an employee's W-2 is inappropriate and an example of government's overreach. There certainly are other less costly and less intrusive ways to disseminate the data and achieve the same end -- providing employees with information while keeping costs down.
Questions or comments? Feel free to email me at firstname.lastname@example.org.
Tony L. Wilson is a principal with NUVISION Financial Corporation based in Conyers. NUVISION is a subsidiary of National Financial Partners Corp., which provides benefits solutions for companies.