(On 1/9/13 this article was updated to note that small employers will not be required to report health cost information on W-2s until the first tax year beginning six months after future guidance is issued.)
The chart below illustrates the types of coverage employers must report on Form W-2 when reporting employer-sponsored health coverage, as required under the Affordable Care Act. This reporting requirement applies for the 2012 tax year (i.e., now) for employers who issued at least 250 W-2s for 2011 and who provide “applicable employer-sponsored coverage” under a group health plan. For smaller employers this reporting requirement will not apply until the tax year beginning at least six months after future guidance is issued. This reporting is for informational purposes only and does not change the taxability of the health coverage. The IRS chart below clarifies what types of coverage must be reported, need not be reported, and those for which reporting is optional. Click here for IRS website.
Transition Relief
For certain employers, types of coverage, and situations, there is transition relief from the requirement to report the value of coverage on the 2012 Forms W-2 (the forms for calendar year 2012 that employers generally are required to provide employees in January 2013). Future guidance may revise reporting requirements but any expanded reporting requirements will not be applicable until the tax year beginning at least six months after the date such 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. The transition relief was provided by Notice 2012-9 (which restated and clarifyied Notice 2011-28).
On the Form W-2, the value of the health care coverage will be reported in Box 12, with Code DD to identify the amount. 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, and the questions and answers for more information. Some of these items also may be required to be reported elsewhere on the W-2. 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 W (see General Instructions for Forms W-2 and W-3). There is no reporting on the Form W-3 of the total of these amounts for all the employer’s employees.
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 | ||
- IR-2011-31, IRS Issues Interim Guidance on Informational Reporting of Employer-Sponsored Health Coverage
- Notice 2010-69, Interim Relief with Respect to Form W-2 Reporting of the Cost of Coverage of Group Health Insurance Under § 6051(a)(14)
- IRS YouTube Video, W-2 Health Insurance Reporting
- Webinar, Reporting of Employer Healthcare Coverage on Form W-2.