On Jan. 4, 2012, the IRS issued Notice 2012-9 on the W-2 Reporting Requirement of the Patient Protection and Affordable Care Act.
Employers that filed 250 or more W-2 forms in 2011 will be responsible for reporting to employees the total cost of their group health benefit plan coverage on their 2012 W-2 forms issued in January 2013. This reporting requirement is informational only and does not mean that coverage will be subject to income tax.
Reporting Requirements
Employers that are required to file fewer than 250 W-2 forms in 2011 will not be required to report the cost of health coverage under the Patient Protection and Affordable Care Act. This transition relief will continue until further guidance is issued. Any additional guidance will not apply to any calendar year beginning within six months of the date the guidance is issued.
Employers are not required to report the cost of health benefit coverage on any W-2 forms furnished to employees prior to January 2013.
It's important to note that only covered employees that elect the coverage and pay the premiums or contribution amounts will receive cost of coverage information on their W-2 forms. For example, if a husband and wife work for the same company and are covered under the same health benefit plan, and the husband signed up for the plan and pays the premiums, he is considered the covered employee. Only the husband, in this case, would have the cost of coverage reported on his W-2. The wife is considered a beneficiary or dependent on the plan and would not have the cost of coverage on her W-2.
Cost of coverage is reported on W-2 forms for 2012 in box 12, using code DD.
Calculating Cost of Coverage
The cost of coverage generally includes both the portion of the cost paid by the employer and the portion of the cost paid by the employee, regardless of whether the employee paid for that cost through pre-tax or after-tax contributions.
Coverage that Does Not Need to be Reported
Notice 2012-9 confirms that applicable employer-sponsored coverage does not include:
- Coverage for excepted benefits under the Health Insurance Portability and Accountability Act (HIPAA) (such as long-term care, accident, disability income, liability and supplemental liability insurance, automobile medical payments, and workers' compensation insurance)
- Coverage for a specific disease or illness or hospital indemnity insurance
- Coverage provided by the federal government, state government or agency of the government under a plan that is maintained primarily for members of the military and their families
- Coverage under a self-funded plan that is not subject to any federal continuation requirements Consolidated Omnibus Budget Reconciliation Act (COBRA), Public Health Services Act (PHSA) continuation, Federal Employee Health Benefits Program (FEHBP) continuation, such as a group health benefit plan sponsored by a church
- Coverage under a health reimbursement account (HRA)
- Contributions to a health savings account (HSA) or Archer medical savings account (MSA)
- Salary reduction contributions to a health flexible spending account (FSA) unless the amount of the FSA benefit exceeds the salary reduction election. In this case, the reportable cost would include the amount that exceeds the salary reduction election.
- Coverage under a "stand-alone" dental or vision plan if the plan satisfies the requirements for being excepted benefits for purposes of HIPAA
- Coverage for employee assistance program (EAP), wellness program, or on-site medical clinic, if that employer does not charge a premium for this type of coverage under COBRA
Additional Information Ultimately, it is the employer's responsibility to accurately determine which employees should receive cost of coverage information. At this time, employers are encouraged to consult with their legal counsel or tax preparer for advice on who should be included and what should be reported to meet the W-2 reporting requirement. |
