Employer Health Care & W-2s: Mandatory Reporting of Costs in 2013

Under the Patient Protection and Affordable Care Act, in 2013 employers must begin reporting “aggregate costs” they pay for employee health coverage on the individual W-2 Forms of those employees. For your reference, five takeaways from the recently published Internal Revenue Service guidance on the reporting requirement:

On Aggregate Costs…

“‘Aggregate cost’ is the total cost of coverage under all applicable employer-sponsored coverages [and] is determined according to the general rules used to determine the applicable premium for COBRA continuation coverage. It includes amounts paid by the employer and the employee, regardless of whether these amounts are paid through pre-tax or post-tax contributions.” (Updated Guidance on Form W-2 Reporting of Healthcare Coverage by Morgan Lewis)

On Filing Exemptions…

“Employers that are tribally chartered corporations, which are wholly owned by a Native American tribal government that is recognized by the federal government, need not comply with the reporting requirement until further guidance is issued. Also exempt from the new reporting requirement, pending further guidance, are employers that file fewer than 250 Forms W-2 for the preceding calendar year.” (IRS Clarifies Form W-2 Reporting Obligations for Employer-Provided Health Coverage by Davis Wright Tremaine LLP)

On Wellness Programs…

“The reported amount is required to include the cost of coverage provided under an employee assistance program (EAP) or wellness program, or by an on-site medical clinic, only to the extent that the coverage is provided under a program that is a ‘group health plan.’” (Legal Alert: IRS Issues Interim Guidance on Health Plan Cost Reporting Requirement by Ford & Harrison LLP)

On Flexible Spending Arrangements…

“The cost of coverage provided under a health FSA does not need to be reported so long as the amount of the employee’s salary reduction under the cafeteria plan (for all tax-qualified benefits) exceeds the amount set aside for the health FSA for the plan year (including salary deferrals plus employer flex credits the employee allocates to the health FSA, or an employer match based on the employee deferral.)” (IRS Updates Guidance on W-2 Reporting of Health Care Costs by Christine Roberts)

On Dental and Vision Coverage…

The guidance “provides that the standard for determining whether the cost of dental or vision coverage is reportable, is the same standard that is used for determining whether coverage is subject to the Health Insurance Portability and Accountability Act of 1996 portability rules.” (IRS Releases Revised Health Care Reporting Guidance by Reed Smith)

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