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Labor & Employment Law Alert: W-2 Reporting of Health Care

February 3, 2012

 W-2 Reporting of Health Care

The Patient Protection and Affordable Care Act of 2010 added Section 6051(a)(14) to the Internal Revenue Code. This new Code Section requires employers to report the cost of employer-sponsored group health plan coverage on W-2 forms. The IRS has issued Notice 2012-9 detailing the reporting requirements as well as providing relief from those reporting requirements for employers who filed less than 250 W-2 forms for 2011.

The reporting of the cost of health care is required for the 2012 calendar year; that is, on the W-2 forms that employers are required to furnish to employees by the end of January 2013. Employers should plan now to meet this requirement.

This reporting is for employee information only, and does not cause employer-provided health coverage to become taxable.

 Which Employers are Subject to This Requirement?

All employers that filed 250 or more W-2 forms for 2011 and provide employer-sponsored health coverage are subject to this reporting requirement. This includes federal, state and local government entities, churches and religious organizations. The exception for those employers who filed less than 250 W-2 forms in 2011 remains in place until the IRS provides further guidance.

How is This Cost Reported?

The cost is reported on Form W-2, Box 12, Code DD. An employer is not required to issue a W-2 form to an individual receiving no compensation (such as a retiree), even though the individual is covered under the employer’s group health plan.

What Cost is Required to be Reported?

The total cost of coverage must be reported, including both employer and employee premiums, regardless of whether the employees paid their share on a pre-tax basis. The reportable cost includes the cost of coverage for the employee and for any person covered by the plan because of a relationship to the employee. Thus, the total reported cost will differ for each employee, based on the coverage elected.

 What Amount Does a Self-Insured Plan Report?

A self-insured plan will report the total cost (employee and employer) by using the COBRA rules.

Is the Cost of a Dental or Vision Plan Included in the W-2 Cost?

The cost of dental and vision coverage is not required to be included if the plans or coverages are offered under a separate policy, certificate or contract, that is not the same as the policy under which the health coverage is offered. If participants have the right to elect the dental or vision coverage (and pay additional premiums), the cost of coverage will not be includable in the W-2.

Other Issues

There are special rules on whether an employer must report the cost of an employee assistance program (EAP), wellness program, or an on site medical clinic.