Form W-2 Reporting
As described in ErisaALERT 2011-5, the Affordable Care Act required informational reporting of the aggregate cost of employer sponsored group health plan coverage beginning with 2012 W-2s issued in January 2013.
On October 31st, the IRS conducted an informative webinar which should be available shortly on their website. In addition, the IRS has a Questions and Answers page on their website. This ALERT will be a quick review of the highlights.
Who must report the aggregate cost of employer sponsored health plan coverage?
Generally, employers who issue 250 or more W-2s in 2011. The IRS noted that the current guidance (Notice 2011-28) is interim guidance. Any changes will be prospective and only upon issuance of further IRS guidance providing at least 6 months advance notice.
What is the purpose of reporting this information?
The reporting is a requirement under the Affordable Care Act. The purpose is informational only, i.e., to provide useful information to employees regarding the cost of their health care coverage.
Are both employee and employer contributions reported?
Yes, the amount reported includes both employee and employer contributions even if employee contributions are pre-tax. There is a special rule for health care FSAs.
What benefits must be reported?
Employers must report the total cost of all applicable sponsored coverage provided to an employee. Generally it is employer provided group health coverage that is not taxable to the employee. Q&A 12 of Notice 2011-28 provides the details. There are some exceptions.
What benefits do not have to be reported?
Generally, Archer Medical Savings Accounts, Health Savings Accounts, long term care, HIPAA excepted benefits, dental and vision coverage which can be elected separately from health care coverage and employee pre-tax contributions to a health care FSA do not have to be reported. Reporting for health care FSAs may be required if the employer provides flex credits. Details can be found at Q&A 12 (Q&A 19 for potential FSA reporting) of Notice 2011-28 as well as the Questions and Answers on the IRS website regarding the reporting requirements.
How is cost determined?
Q&A 24 through 27 of Notice 2011-28 provide the details. Both speakers and the Questions and Answers on the IRS website frequently refer employers to Notice 2011-28.
Where is the cost information reported?
The cost is reported in Box 12 of the W-2 with code DD but is not reported on the W-3.
Is a W-2 required if the employee is a former employee on COBRA or a retiree?
If the only reportable item on the W-2 is the cost of coverage, then there is no need to issue a W-2.
What should Plan Sponsors do now?
- Keep a copy of IRS Notice 2011-28 handy, listen to the recorded webinar when it becomes available and check the IRS website periodically for updates to the Questions and Answers page.
- Document your decision regarding calculating coverage and review with your consultant, payroll provider, HRIS and counsel.
- Consider a communication piece to employees as the 2012 W-2 issuance date approaches assuring employees that the reported amount is for informational purposes only and is not taxable.
You may want to check our new blog periodically for quick updates on compliance issues.
Note: all links are active as of the date of issuance of this ErisaALERT.
Disclaimer: This material is for the sole purpose of providing general information and does not under any circumstances constitute legal advice and should not be used as a substitute for legal advice. You should seek the advice of counsel when applying the requirements to your plan. For more information on this ErisaALERT contact us by phone at 610-524-5351 and ask for Mary Andersen or 973-994-7539 and ask for Theresa Borzelli.
