Complying With the New Form W-2 Rules for Reporting Healthcare Benefits

HR Resource
May 17, 2013 — 1,946 views  
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The Patient Protection and Affordable Care Act for 2013 requires employers to use the form W2. Using this form brings about more transparency in health care costs as employees are shown the cost of their health insurance. Since this provision was not provided earlier, employees did not know their coverage cost.  

Old Rules

The new health care insurance requirement has been brought in by the Affordable Care Act. So, it is evident that the new form W2 rules were not in place earlier. In other words, employers were not under the obligation to report the total cost of coverage to their employees. In the past, employers used to sponsor group health insurance and they can continue to do so. But unlike the previous years, they will report the total coverage cost to their employees. The IRS statement makes it clear that the purpose of this information is to let the employees know their healthcare coverage cost.

The Recent Changes

Some changes have been made to the Form W2. The employers submitting W2 online can now submit up to 50 forms. Earlier, the upper limit was 20. But all W2 forms must be filed by employers using the single identification number of the employer. This format will be available to employers to file the current year W2 form along with 3 previous years.

The new rules make it mandatory for the employers to disclose the cost of health care coverage to their employees. Earlier, employees had no idea of the expenses their employer incurred for their health insurance. Employees often thought that the benefit was free. The new W2 reporting requirements also specify that in case of non-compliance with this mandatory requirement, the penalty can be $200 for each W2 form. This cost can eventually be $3 million at its maximum.

What to Expect From the New Rules?

The new W2 rules should bring about greater transparency as the health care cost to both the employer and employee will be addressed. The new form will show the respective parts each of them pay in the total healthcare cost. Since the employees had no idea on their healthcare cost earlier, the new rules will help them know the actual benefits their companies pay to them. Most employees believe these benefits come free, which is not the case. It will also provide them consumer information related to healthcare that is both comparable and useful. The new reporting requirement does not affect the tax obligation of the employees.

The new form W2 requires the aggregate employer cost of group coverage to be available to each employee, every year on an annual basis. The following applicable coverage are included in the form – dental as well as vision plans unless standalone plan, assistance programs, supplemental Medicare policies, medical plans, executive physicals, and onsite clinics. The new rule with respect to the form W2 will make employees more aware and will let them compare healthcare information that they need to know.

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