Form W-2 Reporting Requirements for Large Employers

The Affordable Care Act requires that certain employers report the cost of coverage provided by the employer for an employee’s health insurance coverage on the employee’s Form W-2.

Employers Subject to Requirement
Employers who filed 250 or more Form W-2s in calendar year 2011 must report applicable employer-sponsored coverage in Box 12 of the Forms W-2 issued by January 31, 2013 (for calendar year 2012).  Until further guidance is issued, an employer is not subject to the reporting requirement for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year.  Employers required to file fewer than 250 Forms W-2 are determined without application of any entity aggregation rules for related employers.

What to Report
Employers subject to the reporting requirement must report the portion paid by the employer and the portion paid by the employee for health insurance coverage, regardless of whether the cost was paid pretax or after-tax.  Plans subject to the reporting requirement are major medical, hospital indemnity or specified illness paid pretax or by the employer, and wellness programs if the employer charged a premium for purposes of COBRA.  The reporting requirement does not apply to health FSA coverage funded solely through employee salary reduction elections.  The cost of coverage under a dental or vision plan that qualifies as an excepted benefit is not required to be included in the aggregate reportable cost of coverage.  Coverage provided under a wellness program or an EAP is includable in the reported cost of coverage to the extent that the program is a group health plan, but such coverage is not reportable if the employer does not charge a premium for that coverage for purposes of COBRA.  The reportable cost of coverage may be based on the information available to the employer as of December 31 and need not be adjusted for later elections or notifications that retroactively affect coverage during the prior year.

Calculating the Rate
Employers sponsoring self-funded plans will use the COBRA applicable premium method to determine the figure to enter in Box 12 of the Forms W-2.  The reportable cost for a period under this method equals the COBRA applicable premium for that coverage for that period.

If the employer offers a transplant insurance policy (specified illness coverage), the cost of that coverage must also be reported.  However, ASR/Physicians Care factors this cost into the COBRA premiums, so a separate calculation is not required.

When an employer charges the same premium for self-only, self-plus-one, and family coverage (composite rate), that employer using a composite rate may calculate and use the same reportable cost for a period for all the different types of coverage under the plan for which the same premium is charged to employees, so long as this method is applied to all types of coverage provided under the plan.  If an employer is using a composite rate for active employees, but is not using a composite rate for determining applicable COBRA premiums for qualifying beneficiaries, the employer may use either the composite rate or the applicable COBRA premium for determining the aggregate cost of coverage, provided that the same method is used consistently for all active employees and is used consistently for all qualifying beneficiaries receiving COBRA coverage.

The aggregate reportable cost to state on Box 12 of Form W-2 should include the cost of coverage under the employer-sponsored group health plan of the employee and any person covered by the plan because of a relationship to the employee.  For example: An employee has family health coverage under an employer-sponsored group health plan for himself, his spouse, and dependents, with a cost of coverage of $15,000.  The aggregate reportable cost with respect to the family health coverage is $15,000.

An employer may also include in the reportable cost of coverage certain amounts that are not required to be included, such as the cost of coverage under an HRA.  Excess reimbursements that are includable in the income of highly compensated individuals under Code Section 105(h) are not included in the reportable cost of coverage.  Further, employers are not obligated to enter “0” in Box 12 of an employee’s Form W-2 if the employee waived, or was not offered, coverage.

If you have questions about this reporting requirement, call ASR/Physicians Care at (616) 957-1751 or (800) 968-2449.