What Kinds of Coverage Must be Reported on Form W-2?
Does the total cost of the health coverage have to be reported, including the employer’s share and the employee’s share?
The reported amount must include the entire cost of “applicable employer-sponsored coverage” under a group health plan. This will include both the portion of the coverage paid by the employer and the portion paid by the employee, regardless of whether it is paid on a pre-tax basis through salary reductions under the employer’s cafeteria plan or on an after-tax basis. The reported cost includes even amounts that are included in the employee’s income (e.g., imputed income for domestic partner coverage).
Further, the reporting requirement will apply regardless of the scope of the employer-sponsored coverage (e.g., employee-only vs. family), and whether the coverage is provided on an insured or self-insured basis.
What types of employer-provided coverage are subject to the Form W-2 reporting requirements?
In general, the Form W-2 reporting requirement applies with respect to all “applicable employer‐sponsored coverage” that is excludible from an employee’s income under Code section 106, or that would be so excludable if it were employer-provided coverage.
Certain types of coverage are, however, generally excludable (either under the PPACA statutory language or the transition guidance provided in Notice 2011-28), including the following:
- Contributions to a health savings account (HSA) (or Archer MSA);
- Salary reduction contributions to a health flexible spending account (FSA) (but note, employer “flex credit” contributions to a health FSA are included);
- Health Reimbursement Arrangements (HRAs);
- Long-term care coverage;
- Stand-alone dental or vision plans that are not integrated into a group health plan providing additional health care coverage (as determined under the HIPAA “excepted benefit” rules);
- Other HIPAA excepted benefits as described in Code section 9832(c)(1) (e.g., accident or disability-only insurance) (but note, on-site medical clinics are included);
- Hospital or fixed indemnity insurance, or coverage only for a specified disease, but only if such coverage is paid for by the employee on an after-tax basis; and
- Self‐insured coverage that is not subject to the COBRA federal continuation coverage requirements.
In addition, employer contributions to a multiemployer plan are not required to be included in the cost of coverage provided to an employee who is covered under the multiemployer plan.
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You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html
Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm’s Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
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