What to Include or Exclude in ACA W-2 Reporting
Payroll must now capture data historically not part of the payroll system
Under the Affordable Care Act (ACA), employers are required to begin informational reporting to employees of amounts spent on certain health plan items. The IRS has provided guidance in the form of FAQs to assist employers in such reporting.
The Internal Revenue Service has published a chart (reproduced below) that details the type of coverage taken into account for Box 12, Code DD reporting.
Payroll systems—whether handled internally or provided by third-party vendors—will need to capture data from the employer that has historically not been part of a payroll system. Employers therefore should familiarize themselves with the specifics of the new requirements. Please note that the items reported must include both employer and employee contribution amounts.
Form W-2 Reporting of Employer-Sponsored Health Coverage | |||
Coverage Type | Report | Do Not Report | Optional |
Major medical plan. | 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 by employer. |
|
| X |
Health savings account (HSA) 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 (pretax) or by employer. | X |
|
|
Employee assistance plan (EAP) providing applicable employer-sponsored health care coverage. | Required if employer charges a COBRA premium | Optional if employer does not charge a COBRA premium | |
Onsite medical clinics providing applicable employer-sponsored health care coverage. | Required if employer charges a COBRA premium | Optional if employer does not charge a COBRA premium | |
Wellness programs providing applicable employer-sponsored health care 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 compensation 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 |
Sources: Kushner & Company, IRS. | |||
Gary B. Kushner SPHR, CBP is the president and CEO of Kushner & Company, an HR strategy and employee benefits and consulting and administration firm with clients in 35 states and five countries. He has advised three U.S. Presidents on health care and has testified before many Congressional committees on employee benefit and HR issues. © 2012 Kushner & Company. All rights reserved. Republished with permission.
Related SHRM Articles:
IRS Issues Updated W-2 Reporting FAQs and Chart, SHRM Online Benefits, February 2012
Employers to IRS: Avoid Burdensome W-2 Health Plan Reporting, SHRM Online Benefits, July 2011
IRS Issues Guidance on W-2 Reporting of Health Care Costs, SHRM Online Benefits, April 2011
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