Wage and Tax Statement — Form W-2
What is the Form W-2 Reporting provision all about?
Essentially, this provision is about transparency and education, requiring employers to report the total value of an individual employee's health benefits on their Form W-2. As a result, employees will better understand the true benefit they receive through their employers, and at the same time gain awareness of the true cost to obtain health coverage.
On March 29, 2011, the IRS issued interim guidance regarding the provision. The IRS previously determined that this reporting would be optional for all employers for 2011 Forms W-2 (to be provided to employes in January 2012). With this change, the requirement is now optional for employers filing fewer than 250 Forms W-2 in the previous tax year. This is effective for 2012 Forms W-2 (issued in January 2013) and until further guidance is issued. Employers filing 250 or more Forms W-2 in 2011 must include the cost of employer-sponsored health coverage on the forms for the tax year 2012.
The IRS reiterated that the health care amounts reported on the W-2 are strictly informational and not taxable to the employee. In addition, Forms W-2 do not need to be issued to individuals who would not otherwise receive a Form W-2, such as COBRA recipients and retirees.
Additional provisions contained in this guidance include:
- The aggregate cost of employer sponsored health coverage will be reported on the Form W-2 in box 12 using the code 'DD'. This amount will not need to be reported on the Form W-3.
- Employers are not required to issue Forms W-2 to non-employees currently receiving health coverage (such as a retiree or surviving spouse) in order to report the health coverage amounts.
- The cost of coverage under all applicable employer-sponsored coverage must be included in the aggregate reportable cost. However, the following amounts are not included:
- The amount contributed to any Archer MSA
- The amount contributed to any Health Savings Account
- The amount of any salary reduction election to a flexible spending arrangement
- The cost of coverage under a Health Reimbursement Arrangement (HRA)
- The amount that an employee elected to apply to a health FSA under a cafeteria plan under Section 125 (excluding any employer matching contribution)
- Cost of coverage under a stand-alone dental plan or vision plan
- Cost of coverage under a self-insured group health plan not subject to federal continuation requirements
- Cost of coverage of military personnel provided by the federal government (or a state or local government)
Stay Tuned
The IRS may be publishing additional guidance on the new requirement. We are vigilantly watching the requirements as they develop, so that we can support employers like you who are learning about the new rules and will need to implement them in the near future.
Calculating the Value of Coverage
The process to determine the aggregate cost of employer-sponsored coverage is similar to determining the premiums for COBRA continuation. Although reporting the cost of coverage is optional with respect to 2011, the IRS continues to stress that the amounts reported are not taxable. Only employers filing 250 or more W-2s will be mandated to include this information on 2012 Forms W-2 (furnished to employees in January 2013). The IRS indicated that this reporting will continue to be optional for smaller employers filing less than 250 Forms W-2, until further guidance is issued. The IRS previously determined that this reporting would be optional for all employers for 2011 Forms W-2.
Former Employees
Employers are not required to issue Forms W-2 to non-employees currently receiving health coverage (such as a retiree or surviving spouse) in order to report the health coverage amounts.
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 that has taken a leadership role in transforming how businesses like yours adapt to and benefit from the rapidly changing insurance industry. We're ready to offer information and assistance to help you navigate the recent Health Care Reform initiatives.
Although health care premium reporting is optional for 2011, 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 report the total value of premiums for employees enrolled in plans through Paychex Insurance Agency.
We can help:
- Educate you on the new requirements during health plan renewal.
- Provide resources to help you explain the changes to your employees.
- Follow the latest regulations to keep you informed about any legislative changes that affect you and your business.
Health Care Reform Updates
With access to legislative and regulatory specialists in Washington, D.C. and expert, in-house sources of legal and compliance guidance, Paychex Insurance Agency is your source for Health Care Reform knowledge, tools, and resources.
Whether you're looking for a Business Owner Policy, Workers' Compensation insurance or group health and life insurance, Paychex Insurance Agency offers flexible, scalable insurance solutions for you, your business and your employees. To learn more about how we can meet your insurance needs, 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.
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