As you may know the Patient Protection and Accountable Care Act (PPACA) requires employers to report the aggregate cost of employer-sponsored group health plan coverage on each employee’s Form W-2 beginning with the 2012 Forms W-2 to be issued by the end of January 2013. 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.
Reportable Plan Information
Employers must report on Form W-2 the cost of "applicable employer-sponsored coverage,” which is generally defined as any group health plan coverage provided by the employer to an employee that is excludable from the employee’s income. Some of the various contributions and coverages that are included in the definition, are listed below. For a complete list and more information on this reporting requirement, refer to the attached information from our compliance advisors, National Financial Partners.
Applicable Employer-Sponsored Coverage
Included Not Included
• Major medical coverage • Employee contributions (through salary reductions)
• Executive medical plan coverage
• Employer contributions to health FSA (including employer flex credits) • HSA and Archer MSA contributions
• Prescription drug coverage • The amount of a health FSA is not required to be included if the amount of the health FSA is funded only through employee salary contributions.
• Coverage under a HIPAA-excepted benefit, including a stand-alone vision or dental plan, is not included.
The cost of coverage of provided under an EAP, wellness program or on-site medical clinic is only includible in the aggregate reportable cost only if a COBRA premium is charged. If the employer does not charge a COBRA premium for continued coverage under the EAP, wellness program or on-site medical clinic, the employer is not required to report the value of such coverage one the employee’s Form W-2.
An employer is required to report the aggregate cost of applicable employer-sponsored coverage, including amounts paid by the employer and the employee, regardless of whether the employee’s contributions are made on a pre- or post-tax basis.
Permissible Reportable Cost Calculation Methods
There are three permissible reportable cost calculation methods (see attached for details). The Premium Charged Method, where the employer reports the cost of coverage by using the premium charged by the insurer, will likely be used by most of our schools.
Changes in Coverage and Cost of Coverage
If an employee enrolls in, terminates or changes coverage during the year, the amount reported on Form W-2 must take into account that change. This includes moving from one coverage tier to another. If an employee were to make a change of status election in January 2013, affecting the cost of coverage in 2012, the changes in the cost of coverage would not need to be reflected in the aggregate reportable cost for 2012.
Where to Report the Cost of Coverage
The employer reports the amount in Box 12 of the Form W-2 using code DD.
In order to avoid penalties, employers should prepare for compliance with the reporting requirement for the 2102 tax year by working with payroll administrators to determine their level of preparedness to administer the new reporting requirement, as well as determining which of their benefit arrangements must be reported.
NFP W2 Reporting Requirements
Notice 2012-9: http://www.irs.gov/pub/irs-drop/n-12-09.pdf
Sample Form W-2: http://www.irs.gov/pub/irs-pdf/fw2.pdf
Form W-2 Instructions: http://www.irs.gov/pub/irs-pdf/iw2w3.pdf
We hope this information is helpful to you. However, this information should not be construed as legal advice—it’s merely a restatement of the law. If you are looking for a legal opinion, you should seek outside counsel’s assistance regarding the application of the law to your school’s particular situation.