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Large Employers: Forms W-2 Must Include Cost of Group Health Coverage

Helpful Hints for Reporting Coverage on Form W-2

Employers that provide a group health plan to employees generally mustreport the cost of the coverage provided to each employee annually on the Form W-2, which must be furnished to employees by January 31st each year. This requirement does not apply to employers that were required to file fewer than 250 Forms W-2 for the preceding calendar year.

The following are helpful hints for employers that are subject to the reporting requirement:

  • The cost of coverage is reported in Box 12 of the Form W-2, with Code DD to identify the amount.
  • In general, the amount reported should include both the portion of the cost paid by the employer and by the employee, regardless of whether the employee paid for that cost through pre-tax or after-tax contributions (however, salary reduction contributions to a health FSA are not reported).
  • The amount reported does not affect federal tax liability, as the value of employer contributions to health coverage continues to be excludible from an employee’s income, and is not taxable.
  • An employer is not required to issue a Form W-2 solely to report the value of the health care coverage for retirees or other former employees to whom the employer would not otherwise provide a Form W-2.
  • Methods for calculating the cost of coverage are explained in IRS Notice 2012-9.

Note that this reporting requirement is for informational purposes only.Reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable.

You may review the IRS Q&As for more guidance regarding this reporting requirement.

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