W-2 Reporting Requirement for Employers

The Affordable Care Act requires that W-2 forms now provide information on the cost of employer-sponsored health coverage. "Applicable employer-sponsored coverage" includes coverage under any group health plan made available to an employee, regardless of who paid the cost. It also applies to government entities, churches, and other religious organizations. Federally recognized Indian tribal governments are exempt. This reporting requirement will not affect the tax treatment of employer-sponsored coverage.

The IRS extends transition relief in certain cases: the reporting requirements do not apply to small employers (i.e., employers filing fewer than 250 Forms W-2 for the previous calendar year) at least through 2012.

Not all coverage needs to be reported, such as:

• Dental or vision coverage that is not part of a group health plan
  
  
• Contributions to an Archer medical savings account or to a health savings account, and salary reductions into a medical Flexible Spending Account (FSA). Flex credits to a medical FSA are reportable
  
  
• Health reimbursement arrangement
  
  
• Coverage under an employee assistance program, wellness program or on-site medical clinic, provided that the employer does not charge a premium with respect to that type of coverage provided under COBRA
  
  
• Coverage only for a specified disease
  
  
• Coverage for long-term care;
  
  
• Coverage only for accident insurance;
  
  
• Hospital indemnity or other fixed indemnity insurance
  
  
• Coverage under a multi-employer plan
  
  
• Self-insured plans of employers not subject to COBRA continuation coverage or similar requirements

Note: An employer may include the cost of coverage that is not required to be included in the aggregate reportable cost, including coverage under an HRA, a multi-employer plan, an Employee Assistance Program, a wellness program, or on-site medical clinic, provided this constitutes applicable employer-sponsored coverage and is calculated using a permissible method under the notices.

There are three methods for calculating the cost of employer-sponsored health coverage:

• For companies that purchase insurance, an employer can report the total premium charged by the insurer for the employee's coverage for each period (for example, single-only coverage) as the reportable cost for that period.
  
  
• For companies with self-funded plans, an employer can report the premium costs calculated in the same way as COBRA rates, using a good faith interpretation of the COBRA requirements.
  
  
• For employers that subsidize the cost of COBRA coverage, so that the premium charged to COBRA qualified beneficiaries is less than the COBRA applicable premium, the reportable cost for a period can be based on a reasonable good faith estimate of the COBRA applicable premium for that period.

It's effective for taxable years beginning after 2012 (i.e., the 2012 W-2 due in January 2013).

For more information on W-2 reporting - IRS.gov