Guidance From IRS on Future W-2 Reporting of Health Care Coverage

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April 7, 2011

Institutions will need to begin reporting the cost of employer-provided health insurance coverage, beginning with Forms W-2 issued for 2012 (provided to employees by January 31, 2013). IRS Notice 2011-28 explains the rules and upcoming reporting requirements in question-and-answer format.

Intended to provide consumer information to employees about the cost of their health insurance plans, the Patient Protection and Affordable Care Act of 2010 included this provision requiring employers to disclose the aggregate cost of coverage for each employee on the annual Form W-2, Wage and Tax Statement. The notice emphasizes that this reporting is solely for informational purposes and does not cause excludable employer-provided health care coverage to become taxable.

Notice 2011-28 explains several issues and considerations related to the new reporting requirement:

Applicable employer-sponsored coverage is defined generally as coverage under any group health plan made available to the employee that is excludable from the employee’s gross income.
The aggregate cost of coverage to be reported will include both the portion paid by the employer as well as the portion paid by the employee.
The amount to be reported includes the cost of coverage for another person (spouse, dependent, child) who is covered by the plan because of a relationship to the employee.
Employers are not required to include the cost of dental or vision plans, unless coverage for one or both are integrated into the group health plan.

The aggregate reportable cost of the health coverage will be reported on Form W-2 in Box 12 using code DD.

Note: The cost of health coverage on Forms W-2 is not required to be furnished to employees prior to January 2013. However, employers choosing to begin reporting these amounts earlier may rely on Notice 2011-28 for guidance regarding voluntary early reporting.