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.
Question 1: What is the W-2 reporting requirement under the PPACA?
Answer: Beginning with W-2 forms issued in January 2013 for tax year 2012, employers that issue250 or more W-2 forms must report the cost of health coverage for each employee on their W-2 forms in Box 12, Code DD. This reporting is for informational purposes only. The cost of coverage is not included in the employee's taxable income. Employers must report the aggregate annual cost of coverage, which combines the employer and employee contributions
Note: Reporting remains optional for employers that issue fewer than 250 W-2 until further guidance is issues.
Question 2: Who is responsible for complying with the W-2 requirement of the PPACA?
Answer: Employers must complete all tax forms for their business as required by the IRS, including the necessary forms for the W-2 reporting requirement. We've explored the possibility of providing standard reports for W-2 forms to all affected groups, but there are information gaps concerning data that only the employer has, which limits our ability to provide accurate and complete reports. Examples of these gaps include, but are not limited to:
- Employer contribution to premium
- Health FSA (Flexible Spending Account) value for the plan year in excess of the employee's cafeteria plan salary reductions for all qualified benefits
- Hospital indemnity or specified illness paid through salary reductions
- Employee Assistance Plan (EAP) providing applicable employer-sponsored health care coverage
- Wellness programs providing applicable employer-sponsored healthcare coverage
- Domestic partner coverage included in gross income
Question 3: Where can i find additional information and resources for help with the W-2 reporting requirement?
Answer: The Internal Revenue Service has videos and webinars that explain this requirement in detail and help the employer understand their obligations. Guidance is available in Notice 2012-9 for customers who need more detailed information regarding appropriate methods to use. To help you, the IRS website and chart lists the components of health coverage that need to be included in W-2 reporting.
We will continue to keep you, our valued client, informed and up to date on the Patient Protection and Affordable Care Act (PPACA) as it continues to unfold. The professionals at Altruis Benefit Consulting are experts in the PPACA legislation and its impact on the group benefit market. If you have any questions or concerns about how the PPACA will impact your specific business please do not hesitate to contact us!