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Washington Week

October 22, 2010 - 6:00pm

Congress had to schedule a two-legged, double-header, lame-duck session in November in part because the Pelosi/Reid-led Congress punted on their responsibility to enact so many legislative items.

However, when they postponed or punted on much of the legislative agenda most Congresses routinely tackle, they 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, dont be surprised if you see a train wreck.

However, a separate train wreck is in the works to occur by the end of January 2011 unless Congress steps in to save the day. This wreck has to do with the Obama health care bill.

Tucked into the Obama health care multi-thousand-page bill was the requirement by ALL employers to include health-care valuations on the W-2 wage and tax form -- a form they must mail to all employees. This new requirement gets implemented in January.

What this requirement entails is a bit sketchy right now, since the IRS hasnt issued any guidelines. So questionsabound 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 reported amount?
  • What type of health reporting is required beyond major medical, dental and vision?
  • What happens when health insurance plans change or get altered during open enrollments, which can occur midyear?
  • What about retirees who are covered by health plans but dont receive a W-2?

Typically, a minor change to a W-2 form requires at least six months to design, develop and implement. The mandates of the Obama health-care bill are especially complex because whatever information the IRS requires W-2s to include is not stored, or easily available, to a payroll system. The payroll office will have to contact a third party and garner the health-care insurance information, and then merge it onto the W-2 form.

Finally, if the reports on this new mandate by the government are true, then the IRS should communicate to the taxpayer that the new W-2 form health-care valuation will not result in the taxation of this value. Hmm --if our health-care insurance policy valuation isnt 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

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