— Overview —
The W-2 reporting of the cost of health benefits became effective in tax year 2012. These benefits are not taxable to the employer or the employee; it is for informational purposes only. The purpose of the reporting requirement is to make employees aware of useful and comparable consumer information on the cost of their healthcare coverage.
— IRS Guidance —
IRS Notice 2012-9 provides guidance on the requirement that employers report the value of the health insurance coverage they provide employees on Forms W-2. The requirement continues to be optional for small employers filing fewer than 250 Forms W-2 in the preceding calendar year.
— What to Report —
Employer-sponsored medical plans (health insurance); executive physicals; on-site clinics; EAPs (Employee Assistance Pans that provide medical aid); wellness programs and flexible spending account contributions/costs (for medical, dental, vision, prescription drug and employers flex credit) made by the employer.
What must be reported in box 12 of the Form W-2: Under Code DD, cost of employer-sponsored health coverage, or ‘health benefits’ are reported (see chart and Q&A). Also, under Code W, employer contributions (including employee’s contributions through a cafeteria plan) to a health savings account (HSA) must be reported. (See 2021 General Instructions for Forms W-2 and W-3).
The amount to be included is the aggregate reportable cost for the employee as defined in IRC Sec. 4980B (f) (4). The aggregate reportable cost generally includes both the portion of the cost paid by the employer and the portion of the cost paid by the employee, regardless of whether the employee paid for that cost through pre-tax or after-tax contributions. Self-insured health plans would use their COBRA premium as the aggregate reportable cost.
Aggregate reportable cost does not include: Long-term care premiums; accident or disability income benefits; specific disease or illness policies; and hospital indemnity policies. Contributions made to an HSA or MSA (Medical Savings Account); and salary reduction contributions made to an FSA.
— W-2 Must Be Provided Within 30 Days —
Did you know that the Affordable Care Act (ACA) created a requirement that an employer must provide a W-2 to a terminated employee within 30 days of a written request?
This new requirement went into effect Jan. 1, 2012. Section 6051(a) of the Internal Revenue Code now requires an employer to provide a W-2 within 30 days after receipt of a written request from a terminated employee.
— Additional Resources —
More information about the reporting procedure can be found at:
- IRS Publication – Form W-2 Reporting of Employer-Sponsored Health Coverage.
- IRS Publication – Employer-Provided Health Coverage Informational Reporting Requirements: Questions and Answers.
- IRS Notice 2012-9 – The IRS provided transitional relief to small employers. This notice also details the types of coverage that must be reported and which are optional.
— For More Information —
If you need additional information, please contact NJBIA’s Member Action Center at 1-800-499-4419, ext. 3 or member411@njbia.org.
This information should not be construed as constituting specific legal advice. It is intended to provide general information about this subject and general compliance strategies. For specific legal advice, NJBIA strongly recommends members consult with their attorney.
