Retiree DP Health Coverage -- W-2 or 1099?

[Guest STP20004]

Does anyone know whether the value of retiree health coverage provided to a retiree's domestic partner under an employer-sponsored retiree health plan, which is typically imputed income to the employee, is reported on a Form W-2 or, alternatively a Form 1099?

I have looked at the regs, the instructions to the 1099 (specifically the instructions to the 1099-R and 1099-Misc) and the W-2 and Publications 15, 15-A and 15-B and everything seems to point to the following:

1. The employer should treat the value of the DP retiree coverage as imputed income to the employee;

2. The imputed income is wages for purposes of employment taxes and withholding; and

3. The wages should be reported on a Form W-2.

Note: The coverage is being funded through a VEBA.

Does anybody have any thoughts? One additional rub... if the W-2 is the correct form, withholding clearly applies, but there will liikely be nothing to withhold from because the former employee will not have wages in addition to the imputed income. This leads I think to the unpalatable result of either (1) the employer paying the amount needing to be withheld (which is also wages to the employee and subject to tax, etc.) or (2) requiring the employee to make some sort of after-tax payment to the employer equal to the amount to be withheld.

If anybody has any ideas or has looked at these issues, please help!!!!

[Guest lvegas]

I'd like to revive this b/c I've come across a similar scenario. It seems this situation is analagous to one where a retiree's group term life coverage exceeds $50k. There, the employer issues a w-2 reporting that excess as imputed income and then the retiree must pay his/her share of the uncollected FICA taxes and federal income tax. The difference though is that there are specific codes (M & N) for use in such situations to indicate that no employment taxes have been withheld -- there are no such codes for retiree domestic partner benefits.

Under Reg section 1.3402(g)-1 I believe supplemental wages is defined to include imputed income for health coverage of a non-dependent suggesting retiree benefits would be subject to W-2. Seems to makes sense that if retiree coverage is generally tax-exempt because it flows from the employment relationship, to the extent that the benefit is then somehow taxable (here, b/c coverage of a non-dependent), it should also be reported as wages flowing from that relationship even though separation from service has occurred.

Anyone have any recent experience with this?