Health Coverage Reporting Requirements on Form W-2

To Report or Not to Report?
Diane Rota and Stacy A. Weller

The Patient Protection and Affordable Care Act amended the Internal Revenue Code to generally mandate that employers report on Form W-2 the aggregate cost of employer-sponsored health care coverage. Beginning in 2013, for the 2012 tax year, all large employers filing more than 250 W-2’s will be required to report health care coverage costs to their employees. For smaller employers, filing 250 W-2’s or less, reporting will begin in 2014 for the 2013 tax year.

These changes to the W-2 reporting are meant to be for informational purposes only and do not increase the amount of taxable income to the employee. These new standards will provide employees with information they may deem useful in comparing health care costs, to see how the organization is spending health care dollars, or to understand the benefits they are receiving through their employer.

All businesses, churches, religious organizations, tax-exempt organizations, and federal, state, and local government agencies will need to comply with the requirements as long as they are providing “applicable employer-sponsored coverage” under a group health plan.

The chart linked below indicates which types of coverage are reportable or not, and which are optional. The optional reporting is considered a transitional relief for certain employers’ types of coverage and situations for the 2012 W-2 reporting and will continue into future years, only, until the IRS releases additional guidelines.

To determine the value of the employer-sponsored health insurance coverage, the employer will have to calculate the applicable premiums for the tax year for the employee under the rules for COBRA continuing coverage under Code Sec. 4980B(f)(4), including the special rule for self-insured plans. The total aggregate cost should be the sum of the employer and employee portions and should be reported in Box 12 of Form W-2 denoted with Code DD. The chart does not apply to any other line item or code requirements. For example, the requirement for reporting HSA contributions in Box 12, Code W will not change although it is not required under Code DD.

We understand these new rules and requirements may be confusing and overwhelming, and that is why we are here to help you. Please feel free to call your trusted advisors here at Herbein + Company should you need assistance.

Click to view a pdf of Herbein's chart on the Form W-2 Reporting Breakdown.

For additional information or questions please contact the authors Diane Rota and Stacy A. Weller.

Diane Rota:
Stacy A. Weller: