Wage and Tax Statement – Form W-2

IRS Requires Employers to Report Health Coverage on W-2s

Beginning with tax year 2011, all employers must report the total value of all health coverage, excluding medical flexible spending accounts (FSAs), on employees' Forms W-2 that will be issued in early 2012. This requirement is just one of many included in the health care reform signed into law on March 23, 2010.

On the Horizon

We are awaiting IRS guidance on the W-2 provision, but one potentially challenging consequence is the possible requirement for employers to provide the value of health coverage to former employees who received health coverage in 2011– for example, retirees, terminated employees on COBRA, and surviving spouses–individuals who wouldn't have received a Form W-2 from an employer in the past.

Stay Tuned

The IRS hasn't finalized the regulations in full detail yet. But Paychex is vigilantly watching the requirements as they develop so that we can support employers like you who are learning the new rules.

Calculating the Value of Coverage

Calculating the value of health coverage for W-2s will likely be similar to the process used to determine the premiums for COBRA continuation. The IRS will use the information to verify medical coverage for future mandates. It will also be used to track coverage values for the excise tax beginning in 2018.

Don't Forget Former Employees!

The IRS may require employers to provide former employees, retirees, terminated employees on COBRA, and surviving spouses with W-2s that show the value of any health coverage provided in 2011. Paychex is monitoring this issue closely. Check back for updates.

Excise Tax for Health Plans

Effective January 1, 2018, plan administrators or insurers will be charged a 40 percent excise tax if the total value of the employer-sponsored health coverage is above $10,200 for single coverage or $27,500 for family coverage, or $11,850 and $30,950 respectively for high risk professions and qualified retirees. The thresholds will be indexed annually for inflation.

Paychex Insurance Agency Can Help

Paychex Insurance Agency is a full-service organization ready to provide and guidance about dependent coverage and other provisions of health care reform.

If you use Paychex Insurance Agency for your health benefits and to manage your employee enrollment information and premium deductions, we will be able to help you meet the IRS requirement because we can report the total value of premiums for employees enrolled in plans through Paychex Insurance Agency. Although we are waiting for details and additional guidance, Paychex Insurance Agency also hopes to be able to transfer the appropriate amounts to your W-2s at year-end to meet the IRS requirement.

An essential partner to over 550,000 businesses nationwide, Paychex closely monitors legislation that affects our clients. With access to legislative and regulatory specialists in Washington, D.C. and utilizing expert, in-house sources of legal and compliance guidance, Paychex Insurance Agency will continue to provide the latest information on health care reform.

Paychex Insurance Agency is ready with the coverage you need, when you need it. To speak with a licensed insurance representative about the right plans for your business, your employees, and yourself, call 877-393-8868 or have an agent call you.

The Department of Health and Human Services and the Internal Revenue Service (IRS) continue to provide specifics and guidance on the Health Care Reform Act. Paychex will monitor these regulatory developments and provide updates as appropriate.

The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. It is provided for informational purposes only. If you require legal or accounting advice, or need other professional assistance, you should always consult your licensed attorney, accountant, or other federally licensed tax professional to discuss your particular facts, circumstances, and business needs.

Insurance available through Paychex Insurance Agency, Inc. (formerly Paychex Agency, Inc.), 150 Sawgrass Drive, Rochester, NY 14620. CA License #0C28207.

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