The Affordable Care Act (ACA) requires employers who file 250 or more W-2s to report the cost of coverage under an employer-sponsored group health plan on an employee's W-2.This is reported in Box 12, with Code DD.
This does not mean that the coverage is taxable—the reporting is for informational purposes only and is intended to provide employees (and the government) information on the value of coverage. While this requirement has been in place since 2014, many employers continue to have questions on the specifics.
The value of major medical coverage is required to be reported. There are three main methods that can be used to calculate the value of this benefit:
- The amount of premiums charged by the insurer for an insured plan.
- The COBRA premiums charged to an employee for a self-insured plan.
- A reasonable estimate of the COBRA premium if the employer subsidizes COBRA coverage.
Dental, Vision, HRAs
Reporting of dental or vision (whether or not integrated into the medical or health plan), or health reimbursement arrangement (“HRA”) contributions is optional.
EAPs, On-Site Medical Clinics, Wellness Programs
The value of Employee Assistance Plans (“EAPs”) on-site medical clinics, and wellness programs are required to be included on the W-2 if the employer charges a COBRA premium. If not, reporting is optional.
HSAs, Archer MSAs, Hospital Indemnity, FSAs
Health Savings Accounts (“HSA”) Archer Medical Savings Accounts (“Archer MSAs”) and hospital indemnity or specified illness (insured or self-funded) paid on an after-tax basis should not be included on Form W-2. However, hospital indemnity or specified illness paid through salary reduction or by the employer should be included.
For flexible spending accounts (“FSAs”) that are funded solely by salary reduction, no reporting should be made. However, the health FSA value for the plan year that is in excess of the employee's cafeteria plan salary reduction for all qualified benefits should be included.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.