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Form W-2 Reporting of Employer-Sponsored Health Coverage

Form W-2 Reporting of Employer-Sponsored Health Coverage

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable. The value of the employer’s excludable contribution to health coverage continues to be excludable from an employee’s income, and it is not taxable. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage.

Employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). However, federally recognized Indian tribal governments are not subject to this requirement.

Transition Relief

For certain employers, types of coverage, and situations, there is transition relief from the requirement to report the value of coverage beginning with the 2012 Forms W-2 (the forms for calendar year 2012 that employers generally are required to provide employees in January 2013). This relief applies to the 2013 Forms W-2 and will continue to apply to future calendar years until the IRS publishes additional guidance. Any guidance that expands the reporting requirements will apply only to calendar years that start at least six months after the guidance is issued. See the “Optional Reporting” column in the below chart for the employers, types of coverage, and situations eligible for the transition relief.

Reporting on the Form W-2

The value of the health care coverage will be reported in Box 12 of the Form W-2, with Code DD to identify the amount. There is no reporting on the Form W-3 of the total of these amounts for all the employer’s employees.

In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. See the chart, below.

An employer is not required to issue a Form W-2 solely to report the value of the health care coverage for retirees or other employees or former employees to whom the employer would not otherwise provide a Form W-2.

The chart below illustrates the types of coverage that employers must report on the Form W-2. Certain items are listed as “optional” based on transition relief provided by Notice 2012-9 (restating and clarifying Notice 2011-28). Future guidance may revise reporting requirements but will not be applicable until the tax year beginning at least six months after the date of issuance of such guidance.

The chart reviews the reporting requirements for Box 12, Code DD, and has no impact on requirements to report these items elsewhere. For example, while contributions to Health Savings Arrangements (HSA) are not to be reported in Box 12, Code DD, certain HSA contributions are reported in Box 12, Code

 

Follow this link for general instructions for W-2 and W-3 reporting– http://www.irs.gov/pub/irs-pdf/iw2w3.pdf

Form W-2 Reporting of Employer-Sponsored Health Coverage

Coverage Type

Form W-2, Box 12, Code DD

Report

Do Not Report

Optional

Major medical

X

Dental or vision plan   not integrated into another medical or health plan

X

Dental or vision plan   which gives the choice of declining or electing and paying an additional   premium

X

Health Flexible   Spending Arrangement (FSA) funded solely by salary-reduction amounts

X

Health FSA value for   the plan year in excess of employee’s cafeteria plan salary reductions   for all qualified benefits

X

Health Reimbursement   Arrangement (HRA) contributions

X

Health Savings   Arrangement (HSA) contributions (employer or employee)

X

Archer Medical Savings   Account (Archer MSA) contributions (employer or employee)

X

Hospital indemnity or   specified illness (insured or self-funded), paid on after-tax basis

X

Hospital indemnity or   specified illness (insured or self-funded), paid through salary reduction   (pre-tax) or by employer

X

Employee Assistance   Plan (EAP) providing applicable employer-sponsored healthcare coverage

Required if employer charges a COBRA premium

Optional if employer does not charge a COBRA premium

On-site medical   clinics providing applicable employer-sponsored healthcare coverage

Required if employer charges a COBRA premium

Optional if employer does not charge a COBRA premium

Wellness programs   providing applicable employer-sponsored healthcare coverage

Required if employer charges a COBRA premium

Optional if employer does not charge a COBRA premium

Multi-employer plans

X

Domestic partner   coverage included in gross income

X

Governmental plans providing   coverage primarily for members of the military and their families

X

Federally recognized   Indian tribal government plans and plans of tribally charted corporations   wholly owned by a federally recognized Indian tribal government

X

Self-funded plans not   subject to Federal COBRA

X

Accident or disability   income

X

Long-term care

X

Liability insurance

X

Supplemental liability   insurance

X

Workers’ compensation

X

Automobile medical   payment insurance

X

Credit-only insurance

X

Excess reimbursement   to highly compensated individual, included in gross income

X

Payment/reimbursement   of health insurance premiums for 2% shareholder-employee, included in gross   income

X

Other Situations

Report

Do Not Report

Optional

Employers required to   file fewer than 250 Forms W-2 for the preceding calendar year (determined   without application of any entity aggregation rules for related employers)

X

Forms W-2 furnished to   employees who terminate before the end of a calendar year and request, in   writing, a Form W-2 before the end of that year

X

Forms W-2 provided by   third-party sick-pay provider to employees of other employers

X

The chart was created at the suggestion of and in collaboration with the IRS’ Information Reporting Program Advisory Committee (IRPAC). IRPAC’s members are representatives of industries responsible for providing information returns, such as Form W-2, to the IRS. IRPAC works with IRS to improve the information reporting process.

 

 

Source:  http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage

 

 

Filed Under: Healthcare Reform News, News and Updates

Previous Post: « Changes with Wellness Programs for 2014
Next Post: Explanation of Final Regulations on the Employer Mandate. »

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