Employee Benefits Compliance, Large Employers, Reporting Requirements

Summary of W-2 Health Care Cost Reporting Requirements — Update for 2014

personal information

Since 2013 is drawing to a close, here is a brief recap of the PPACA requirement that “large” employers must report the total cost of employer-sponsored group health coverage on 2013 W-2s (which must be issued to employees and filed with the Social Security Administration (SSA) by January 31, 2014).

Additional information is at the IRS website at http://www.irs.gov/uac/Employer-Provided-Health-Coverage-Informational-Reporting-Requirements:-Questions-and-Answers

Update May 2014: Updated URL, webpage last revieiwed or updated May 5, 2014:  http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage 

What Employers Must Report?

Employers who issued at least 250 W-2s in 2012 must report health care costs on 2013 W-2s.  The 250 W-2s include those for all employees, whether you classified them as full-time, part-time, seasonal or temporary employees.  The 2013 W-2s must be sent to employees by January 31, 2014.

The W-2 count is determined without application of any entity aggregation rules for related employers.  Until further guidance from the IRS, two companies under common control would not be subject to this reporting requirement if each filed fewer than 250 Forms W-2 for the preceding calendar year, even if the combined total was more than 250.

What Data Must be Reported on the W-2?

  • Employer and Employee contributions for major medical and prescription drug coverage
  • Employer contribution for health flexible spending accounts (HFSAs) (and payments from HFSAs) that exceed the employee’s pre-tax HFSA contribution for the year.  (I.e., the employee pre-tax contribution to the HFSA is not reported on the W-2.)
  • Employee pre-tax contributions for hospital indemnity or specific illness policies (e.g., AFLAC cancer policy).  Employee after-tax contributions are not reported on the W-2.
  • Domestic partner major medical and prescription drug coverage – amounts included in the employee’s gross income must also be reported on the W-2.
  • Cost of Employee Assistance Plan (EAP), wellness program and onsite medical clinic, only if they provide “healthcare” coverage and the employer charges a COBRA premium for continued coverage.

Suggestions on where to Find the Data You Need to Report

  • Insured plan sponsors: Review your 2013 bills from your carrier
  • Self-insured plan sponsors:  contact your COBRA vendor for a COBRA rate
  • Review each employee’s 2013 payroll data (for pre-tax contributions to hospital indemnity or specific illness plans, and for imputed income for domestic partner coverage)

What Data Are You Not Required to Report on the W-2s?

  • Dental or vision coverage that gives the choice of declining, or electing and paying an additional premium (but employer can choose to report)
  • Dental or vision that is not integrated with a major medical plan (but employer can choose to report)
  • Employee pre-tax contributions to a health flexible spending account (HFSA)
  • Health Reimbursement Account (HRA) contributions (but employer can choose to report)
  • Health Savings Account (HSA) contributions by the employer or employee
  • Hospital indemnity or specific illness policies (e.g., AFLAC cancer policy) paid by the employee on an after-tax basis

What if the Reporting Requirements Change in the Future?

The IRS website provides that the transition relief from the reporting requirement (i.e., that small employers need not report, and that certain types of coverage need not be reported yet) will continue to apply for future calendar years until the IRS publishes guidance giving at least six months of advance notice of any change to the transition relief.  However, reporting by these employers and for these types of coverages may be made on a voluntary basis, even while the transition relief applies and reporting is not required.

Additional Information

  • Report the health care cost information in Box 12 of the W-2, using Code DD
  • The reporting is for informational purposes only.  It does not change the taxability of the benefits.
  • If you have union employees in a multi-employer union plan:
    • They count in determining if you  issued at least 250 W-2s in the prior calendar year, BUT
    • You are not required to report the cost of health care that was provided through the multi-employer union plan