Reporting of Employer Provided Health Coverage Costs in 2012 Form W2

Posted on 11.14.12

As part of the Patient Protection and Affordable Care Act (PPACA), many employers may now have to disclose the cost of employer-sponsored health insurance coverage on Form W2.  Disclosure does not include amounts contributed to an Archer MSA or the health savings account (HSA), any salary reduction contributions to a flexible spending arrangement (FSA), or certain “excepted benefits” including worker's compensation and disability income insurance.  It should be noted that the reporting does not change the taxable status – this is merely disclosure to provide employees useful and comparable consumer information on the cost of their health care coverage.

This reporting was optional for all employers in for 2011 Form W2.  Except for a limited exceptions, mainly related to small employers, the reporting is mandatory for 2012 Form W2.  The amount reported should include both the portion paid by the employer and the portion paid by the employee. In the case of a health FSA, the amount reported should not include the amount of any salary reduction contributions.  The cost of these health care benefits will be reported in box 12 of the Form W-2, with Code DD to identify the amount.

Good news for small employers – the effective date of such reporting has been delayed.  Employers filing fewer than 250 Forms W-2 for the previous calendar year (for example, employers filing fewer than 250 2011 Forms W-2 will not be required to report the cost of coverage on the 2012 Forms W-2

Additionally, the exceptions to reporting will continue to apply until the IRS publishes guidance giving at least six months of advance notice of any change to the transition relief.  Employers who qualify for this relief may choose to report the information, but are not required to do so.

Additional guidance can be found at:

http://www.irs.gov/uac/Employer-Provided-Health-Coverage-Informational-Reporting-Requirements:-Questions-and-Answers