The quick answer as to why do it based on W2... ALPA has a very complex cash disbursement policy, that requires a whole bunch of things to been in place for money to be paid out to the pilot group. It's in place because of a whole bunch of lawsuits in the past. Part of the policy is that unless you get an exemption, a certain percentage of the funds (I think it's 30% but I'm not sure), has to be held back for a period of time in the event that things get contested by pilots. The cleanest way around having to do a hold back, is to use a uniform and recognized method for distributing funds AND to have the pilot group vote and ratify the method used. That's why the retro or signing bonus is normally part of the Section 6 ratification process.
The other common and recognized method is to just pay out a certain number of credit hours to each pilot at the delta between their pay rate and the new pay rate. The problem with this (and the reason that W2 earnings often get used), is that even the guys that don't fly high and pick up tend to complain it's not fair that they get 83 hours of retro when they fly 85 hours every month, and the guy who drops all his trips and only flies 70 hours a month is also getting 83 hours.
The last contract out here, we ended up getting full "retro" pay, based on specific payrates running back to the amendable date. Each pilot's check was based on the difference between their actual pay and the new pay rate, each month in the specific category they held during that month times 83 hours (which was the average line value at the time). Some guys liked it, but some guys complained because either they flew more than 83 hours every month or the hourly delta was more for some fleets than other fleets.
