W-2 Reporting

Beginning with W-2 forms issued in January 2013 (for calendar year 2012), employers are required to report the value of employer-provided health coverage on Form W-2.  In order to assist employers with this reporting requirement, the IRS issued Notice 2011-28, which provides answers to a number of frequently asked questions ("FAQs").  

The Notice and FAQs provide the following:

• The cost of coverage should be listed on Box 12, using code DD
• The reporting is for informational purposes only (it is not taxable income)
• The requirement applies to all employers that provide applicable employer-sponsored coverage
• Both employer and employee cost of coverage must be reported,  regardless of whether paid on a before (via salary reduction agreement) or after tax basis
• The Notice and the FAQs provide guidance on what constitutes "applicable" coverage.  Some coverage that must be reported includes the following:
  • Medical
  • Medicare supplemental coverage
  • On-site medical clinics 
  • Retiree medical coverage (but only if required to file W-2 for retiree)
  • Employer contributions to FSA
• Some coverage that employers do not need to report includes the following:
  • Non-integrated dental or vision
  • Employee salary reduction contributions to FSA
  • HRA coverage
  • HSA
  • Long-term care
  • Accident or disability income insurance
  • Workers’ compensation
  • Small self-insured health plan (not subject to COBRA)

The Notice also provides transitional relief for small employers that have filed fewer than 250 Forms W-2 for 2011 calendar year.  These small employers are not required to report the cost of health coverage until further guidance is issued by the IRS.