W-2 Health Care Cost of Coverage Reporting Requirements

April 12, 2012
5 min read

Beginning in tax year 2012 – and reportable on W-2s issued in early 2013 – employers will be required to provide their employees with the total cost of their group health benefit plan.
This new cost of coverage requirement, which pertains only to employers with 250 or more employees, is for informational purposes only – it will not reflect an employee’s taxable income.
Cost of Coverage Reporting: Who, What & Where
The only employees that should be receiving this new cost of coverage information on their 2012 W-2s are those that are actually electing coverage and paying the contributions. Let’s say both a husband and wife are under your employ. If the wife elected dependent coverage for her husband – under the same group health benefit plan – then only the wife would have the cost of coverage information provided on her W-2.
As far as what you, as an employer, need to report, it’s generally the total cost of coverage under all applicable employer-sponsored group health plans, including:

  • Both the employer- and employee-paid costs, regardless of whether they were paid on a pre-tax or after-tax basis
  • The cost of dependent coverage, even if it’s included in the employee’s gross income
  • Employer contributions to any FSAs – except for those made through salary deductions
  • The portion of an employee-elected health FSA – if it falls under a Section 125 cafeteria plan – that exceeds the amount of salary reduction for all qualified benefits elected by the employee
  • The cost of any dental and vision plans that do not qualify as stand-alone products
  • The cost of coverage under self-insured group health plans that are subject to federal continuation coverage requirements (such as COBRA, ERISA, the Public Health Service Act, and the temporary continuation coverage requirement of the Federal Employees Health Benefits Program)

And as for the ‘where’ part, the total cost of employer-provided group health coverage – as detailed above – should be reported on 2012 W-2 forms in Box 12, using Code DD.
Mum’s the Word: Coverage that You Don’t Need to Report
Per IRS Notice 2012-9, you’re not responsible for reporting …

  • Contributions to a health savings account (HSA), Archer medical savings account (MSA), or health reimbursement account (HRA)
  • Salary reduction contributions to an FSA – if contributions occur only through employee salary reduction
  • The cost of stand-alone dental and vision plans – if the benefits meet the requirements for being considered excepted benefits under HIPAA
  • Excepted benefits that fall under HIPAA, including long-term care, accident, disability income, liability and supplemental liability insurance, automobile medical payments, and workers’ compensation insurance
  • Coverage for an employee assistance program (EAP), wellness program, or on-site medical clinic, as long as the employer does not charge a premium for this type of coverage under COBRA
  • Coverage for a specific disease or illness or hospital indemnity insurance
  • Coverage provided by the federal government, state government or agency of the government under a plan that is maintained primarily for members of the military and their families
  • Coverage under a self-funded plan that is not subject to any federal continuation requirements Consolidated Omnibus Budget Reconciliation Act (COBRA), Public Health Services Act (PHSA) continuation, Federal Employee Health Benefits Program (FEHBP) continuation, such as a group health benefit plan sponsored by a church

We’re only a phone call away.
If this new cost of coverage reporting requirement – or any other healthcare reform provision – has you fretting, remember that we’re only a phone call – or email away. If you have any questions, feel free to call us at 1-800-250-2741, ext. 170 or via email at Solutions@gsanational.com.
Please note that the information contained on this website is provided as an
informational service to our clients and does not constitute legal advice.

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