Changes to W-2 Reporting – Are You In Compliance?

Has your business prepared for the change in W-2 reporting requirements? In 2012, another administrative reporting requirement of the Patient Protection and Affordable Care Act goes into effect: employers must report the value of health benefits provided on each W-2 form issued.

The amount should be reported for 2012, in box 12 with a Code DD. This regulation only applies to businesses supplying more than 250 W-2s. 

Coverage that must be reported is defined under PPACA as any group health plan that is not included in the employee’s gross income. Whether the employer or employee pays for the coverage is not applicable to what should be reported.

Government entities, nonprofit organizations and companies not subject to COBRA continuation coverage requirements are all mandated to report the coverage on W-2 forms. Federally recognized Indian tribal governments and corporations owned by such entities are exempt.

Coverage not considered part of the benefits that must be reported include:

  • Long-term care insurance.
  • Accident or disability income insurance.
  • Liability insurance or coverage that supplements liability insurance.
  • Workers’ compensation insurance or similar coverage.
  • Vehicle medical payment insurance.
  • Credit-only insurance.
  • Limited-scope dental or vision care provided under a separate policy.
  • Coverage for a specific disease, hospital indemnity or other fixed indemnity insurance.
  • Contributions to health savings accounts.
  • Contributions to a health reimbursement arrangement.
  • Salary reductions or contributions to health flexible spending arrangements.
  • Contributions to Archer medical savings accounts.
  • Costs of self-insured plans excluded from COBRA requirements.
  • Multi-employer plans that employers contribute to.
  • Plans from government employers for military personnel or their families.

These exclusions do not apply if the coverage is deemed applicable, such as a long-term disability plan that includes health benefits.

The information reported will be used for data-collection purposes only, and not for future taxation reasons, according to the regulations. However, in 2018, a 40 percent tax will be assessed on excess health coverage as a part of PPACA.

For employees that only work at a company or organization for part of 2012, employers can chose to report the partial or full-year’s value of benefits on the W-2, so long as it is consistent.

To calculate the cost, employers can employ methods used in determining the cost of COBRA applicable premiums, though an additional 2 percent cannot be added. The COBRA method includes finding the reportable cost for a covered employee, but the employer must still report the cost of the premium charged by the insurer.

Source: The Society for Human Resource Management

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