Healthcare Law Brings New W-2 Reporting Requirements

HR Resource
November 21, 2012 — 1,584 views  
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Healthcare Law Brings New W-2 Reporting Requirements

The Federal Patient Protection and Affordable Care Act brings with it many new regulatory requirements. As these regulations begin to take effect, Benefits Administrators and HR Managers should familiarize themselves with the new rules.

One major change in the reporting requirements is that employers must now document the cost of health care benefits on their employees’ W-2 forms. Beginning with 2013 W-2s (2012 tax year), the cost of employee health insurance must be reported even though these costs remain non-taxable. According to the IRS, this requirement is strictly a means to educate employees about the value of this benefit.

The requirement does include exceptions and transition relief for employers who qualify. For example, if an employer issued fewer than 250 W-2 forms for the 2011 tax year, they will not have to meet this requirement for the 2012 tax year. The 250 number, however, must include any W-2’s issued on the employer’s behalf. These employers will continue to be exempt until the IRS tells them they must report. For a total list of exemptions and available relief, HR Managers or Benefits Administrators can consult the IRS’s questions and answers page for reporting.

Employers who do not qualify for an exemption or transition relief should be prepared to report the both the employer’s cost for health coverage, as well as the employee cost, if applicable. Domestic partner coverage must also be reported. Other coverage may be subject to reporting depending factors such as whether the benefit is included in COBRA coverage, or is in addition to the employee’s salary.

Benefits such as Health Savings Arrangements (HAS) or Health Flexible Spending Arrangements (FSA) should not be reported. Reporting benefits such as Dental and Vision coverage that is not included as part of a healthcare coverage package is optional. Employers are not required to report coverage for employees who terminate prior to the end of the tax year and who request their W-2’s early. The IRS includes chart of benefits that are and are not required to be reported.

HR Managers and Benefits Administrators should take some time and familiarize themselves with the new reporting requirements regarding healthcare coverage. Additionally, they may want to educate their employees about this new requirement before issuing W-2’s. Although healthcare benefits remain non-taxable, this change may cause confusion or concern which employers can mitigate with proper education of their employees.

 

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