The Affordable Care Act requires most employers to report the cost of coverage under an employer sponsored group health plan on the Form W-2 of each employee annually. However, reporting the cost of health care coverage on the W-2 does not mean that the coverage is taxable, as the value of the employer’s excludable contribution to group health coverage continues to be excludable from an employee’s income. Consequently, this reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage.
Employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). However, federally recognized Indian tribal governments are not subject to this requirement.
For certain employers, types of coverage and situations, there is transition relief from the requirement to report the value of coverage beginning with the 2012 Forms W-2. This transition relief applies to the 2013 Forms W-2 and will continue to apply to future calendar years until the IRS publishes additional guidance. (Note: employers generally are required to provide employees with the 2013 Forms W-2 in January 2014.) Any guidance that expands the reporting requirements will apply only to calendar years that start at least six months after the guidance is issued. See the “Optional Reporting” column in the below chart for the employers, types of coverage, and situations eligible for the transition relief.
Reporting on the Form W-2
The value of the health care coverage will be reported in Box 12 of the Form W-2, with Code DD to identify the amount. There is no reporting on the Form W-3 of the total of these amounts for all the employer’s employees.
In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. See the chart, below, and the questions and answers for more information.
An employer is not required to issue a Form W-2 solely to report the value of the health care coverage for retirees or other employees or former employees to whom the employer would not otherwise provide a Form W-2.
The chart below illustrates the types of coverage that employers must report on the Form W-2. Certain items are listed as “optional” based on transition relief provided by Notice 2012-9 (restating and clarifying Notice 2011-28). Future guidance may revise reporting requirements but will not be applicable until the tax year beginning at least six months after the date of issuance of such guidance.
The chart reviews the reporting requirements for Box 12, Code DD, and has no impact on requirements to report these items elsewhere. For example, while contributions to Health Savings Arrangements (HSA) are not to be reported in Box 12, Code DD, certain HSA contributions are reported in Box 12, Code W (see General Instructions for Forms W-2 and W-3).
The chart was created at the suggestion of and in collaboration with the IRS’ Information Reporting Program Advisory Committee (IRPAC). IRPAC’s members are representatives of industries responsible for providing information returns, such as Form W-2, to the IRS. IRPAC works with IRS to improve the information reporting process.
- IR-2011-31, IRS Issues Interim Guidance on Informational Reporting of Employer-Sponsored Health
- Notice 2010-69, Interim Relief with Respect to Form W-2 Reporting of the Cost of Coverage of Group
Health Insurance Under § 6051(a)(14)
- Webinar, Reporting of Employer Healthcare Coverage on Form W-2.