W-2 reporting requirements expanded for some employers
April 20, 2011
Beginning in tax year 2012, employers that issue 250 or more W-2 forms must report the cost of health coverage for each employee on their W-2 forms issued in 2013 and beyond. The reporting is for informational purposes only. The cost of coverage is not included in the employee’s taxable income. Reporting remains optional for employers that issue fewer than 250 W-2 forms until further guidance is issued.
Employers are not required to report the cost of coverage on interim W-2s requested by employees before the end of the calendar year.
When calculating and reporting the cost of coverage, the following information should be included:
- Cost of coverage paid by the employee and by the employer, including the cost of dependent coverage. If an employee adds or removes a dependent during the calendar year, the cost change must be reflected on the W-2.
- Dental and vision benefits if integrated with the medical benefits. The cost of dental and vision coverage should not be included if dental and vision are offered under a separate certificate, or if the employee is allowed to opt out of coverage and is required to pay part of the cost of coverage.
- Amount of employer’s contribution to flexible spending accounts (FSAs)
There are benefits that should not be included in reporting the cost of coverage, including:
- Contributions to health savings accounts (HSAs), Archer medical savings accounts (MSAs), or health reimbursement arrangements (HRAs)
- All indemnity policies offered by the employer
Employers will not need to report the value of health benefits provided to retirees, if the employer is not otherwise required to issue the individual a W-2 form.
The W-2 does not need to include the cost of benefits if the employee’s only applicable benefits are received through a multiemployer plan.
Employers may select among three options in calculating the cost of coverage to report on W-2s:
- COBRA applicable premium method. Use the COBRA premium cost.
- Premium charged method. Employers reporting cost of coverage for employees under insured plans may calculate the reportable cost using the premium charged by the insurer.
- Modified COBRA premium method. If the employer subsidizes the cost of COBRA coverage, it can use a reasonable good faith estimate of the COBRA premium; or, if the current year COBRA premium is equal to a prior year COBRA rate, the prior year COBRA rate can be used to report the cost of coverage in the current year.
If an employee terminates their coverage anytime during the calendar year and elects COBRA or other coverage, the employer can choose to either report the cost of coverage for the active status period, or for both active status and COBRA periods.
Future guidance may change these requirements and exceptions, and we will provide updated information when more details are available.
The information on this website is based on BCBSM's review of the national health care reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.