New 2012 IRS W-2 Reporting Requirements

Monday, June 11, 2012
New 2012 IRS W-2 Reporting Requirements

Under the Affordable Care Act, Employers are now required to report on the costs of coverage for Employer-Sponsored Group Health plans on W-2s in January 2013 for Calendar year 2012 and future Calendar years unless the employer meets the criteria for exemption which is listed below. The new reporting requirement is for the employee’s information only and is intended to provide useful and comparable consumer information on the cost of their health care coverage.

Q: What costs are included?

A:In general, the amount reported should include both the portion paid by the EMPLOYER and employee.

Q: Where are these costs reported on the 2012 W-2?

A:Box 12 with code DD to identify the amount.

Q: What about health FSA, how is this handled?

A:In the case of a health FSA, the amount reported should not include the amount of any salary reduction contributions.

Q: Which employers are currently exempt from the new requirement until further notice?

A.1. Federally recognized Indian tribal governments and employers that are tribally chartered corporations wholly owned by a Federally recognized Indian tribal government. 2. Employers that filed fewer than 250 W-2s for the previous calendar year (for example, employers that filed fewer than 250 W-2s for calendar year 2011 would not be required to report the cost of health plan coverage on W-2s for calendar year). 3. Employers that maintain self-insured plans that are not subject to COBRA continuation coverage. 4. Additionally if an employee terminates employment during the year and requests an early W-2, the employer is not required to include the health plan cost on the requested W-2.

Q: What if my payroll system does not store the EMPLOYER costs for my group health plans? What should I do?

A: You can contact SBS Payroll, Inc. at (949) 225-3019 to learn more about signing up for payroll services as the payroll software that SBS utilizes stores all EMPLOYER costs for benefits in the system and can already address these new requirements.

Q: Where can I learn more detailed information about the types of coverage that employers must report on the Form W-2?

A: The chart below below illustrates the types of coverage that employers must report on the Form W-2 or you can consult with your CPA. Certain items are listed as “optional” based on transitional relief provided by IRS Notice 2012-9 (http://www.irs.gov/pub/irs-drop/n-12-09.pdf) and restated and clarified by IRS Notice 2011-28 (http://www.irs.gov/pub/irs-drop/n-11-28.pdf).

     
Form W-2 Reporting of Employer-Sponsored Health Coverage
Coverage Type Form W-2, Box 12, Code DD
Report Do Not Report Optional
Major medical X    
Dental or vision plan not integrated into another medical or health plan     X
Dental or vision plan which gives the choice of declining or electing and paying an additional premium     X
Health Flexible Spending Arrangement (FSA) funded solely by salary-reduction amounts   X  
Health FSA value for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits X    
Health Reimbursement Arrangement (HRA) contributions     X
Health Savings Arrangement (HAS) contributions (employer or employee)   X  
Archer Medical Savings Account (Archer MSA) contributions (employer or employee)   X  
Hospital indemnity or specified illness (insured or self-funded), paid on after-tax basis   X  
Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer X    
Employee Assistance Plan (EAP) providing applicable employer-sponsored healthcare coverage Required if employer charges a COBRA premium   Optional if employer does not charge a COBRA premium
On-site medical clinics providing applicable employer-sponsored healthcare coverage Required if employer charges a COBRA premium   Optional if employer does not charge a COBRA premium
Wellness programs providing applicable employer-sponsored healthcare coverage Required if employer charges a COBRA premium   Optional if employer does not charge a COBRA premium
Multi-employer plans     X
Domestic partner coverage included in gross income X    
Governmental plans providing coverage primarily for members of the military and their families   X  
Federally recognized Indian tribal government plans and plans of tribally charted corporations wholly owned by a federally recognized Indian tribal government   X  
Self-funded plans not subject to Federal COBRA     X
Accident or disability income   X  
Long-term care   X  
Liability insurance   X  
Supplemental liability insurance   X  
Workers’ compensation   X  
Automobile medical payment insurance   X  
Credit-only insurance   X  
Excess reimbursement to highly compensated individual, included in gross income   X  
Payment/reimbursement of health insurance premiums for 2% shareholder-employee, included in gross income   X  
Other Situations Report Do Not Report Optional
Employers required to file fewer than 250 Forms W-2 for the preceding calendar year (determined without application of any entity aggregation rules for related employers)     X
Forms W-2 furnished to employees who terminate before the end of a calendar year and request, in writing, a Form W-2 before the end of that year     X
Forms W-2 provided by third-party sick-pay provider to employees of other employers     X

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