1. 5527 POINTS
    Marlin McKelvyPRO
    President, Consumer Directed Benefit Solutions, Memphis, Tennessee
    Many employees have been surprised and concerned to see the value of their employer provided health insurance being reported on their W2's.  This is a requirement of the Affordable Care Act.  Under transitional relief guidelines issued, so far only employers who issue 250 or more W2 forms in a calendar year are required to report this information.  Eventually all employers who provide health insurance to their employees will be required to report this information on the employee's W2.

    This reporting of the employer paid amount for health insurance is for "informational" purposes only and is not being added to the employee's gross income for income tax purposes.  There are some skeptics who see this as a precursor to the eventual tax treatment of employer paid health insurance as employee income at some future date but at this time there is nothing in the Affordable Care Act or any pending legislation that would do this.

    Where this reporting of employer paid health insurance will become a tax issue will be in 2018 when the "Cadillac Tax" portion of the health care law goes into effect.  The Cadillac Tax will be a 40% excise tax imposed on health insurance plans whose annual premium costs exceed $10,200 for an individual or $27,500 for family coverage (these amounts will be indexed for inflation).  So, an employer in 2018 who finds themselves with health plan premium levels exceeding these amounts will be assessed a 40% tax penalty.

    While such annual premium amounts may seem unreachable by many persons in 2014.  In some areas of the country, and especially with some very rich collectively bargained plans, total costs are already coming close to these trigger points.  When one observes the increases in group health insurance plan costs already triggered by the requirements of the Affordable Care Act in 2014 and applies projected inflationary trend increases over the next few years it becomes much easier to estimate that a larger portion of employer based plans could find themselves subject to this tax penalty.  This is one of the underlying motivations for more employers to move to high deductible health insurance plans in order to reduce their premium costs.

    Answered on April 29, 2014
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