Many employers are required to report the cost of an employee's health care benefits in Box 12 of Form W-2, using Code DD to identify the amount.
This amount is reported for informational purposes only and is NOT taxable. It is included in Box 12 in order to provide comparable consumer information on the cost of health care coverage.
In general, the amount reported will include the portion paid by the employer as well as the portion paid by the employee. It will not include the amount of any salary reduction contributions.
The Patient Protection and Affordable Care Act added the requirement for employers to list on an employee's W-2 the "aggregate cost" of applicable employer-sponsored coverage. The requirement was optional for 2011, so most employees will see this amount reported for the first time in 2012. Reporting for certain small employers remains optional until 2013.
For more information see the IRS Questions and Answers to help understand ACA Reporting Requirements
To provide employees with useful consumer information regarding the value of their health care benefits, the Affordable Care Act (ACA) requires employers providing applicable employer-sponsored coverage under a group health plan to report the value of the health care coverage on their employees’ W-2 (Wage and Tax Statement) Forms. This amount is not taxable and should include both the amount paid by the employer as well as the portion paid by the employee.
Helpful facts:
- Employers are required to provide this information by Jan. 31 for the previous year.
- The cost must be reported in Box 12 (using Code “DD” to identify the amount) of an employee’s W-2.
- The reporting requirement currently applies only to employers who filed 250 or more eligible employee W-2 Forms in the preceding year.
- The amount reported should include the amount paid by the employer and the portion paid by the employee, regardless of whether it is paid by the employee on a pretax or post-tax basis.
What is included in the value of applicable employer sponsored coverage?
- Applicable employer-sponsored coverage generally includes any employer-provided group health plan coverage under an insured or self-insured health plan that is excludable from the employee’s gross income. Though there are a few exceptions, the amounts that employers need to report include pretax and post-tax contributions paid by both the employer and the employee for health coverage.
- Aflac policies this may apply to include: Hospital Indemnity, Hospital Intensive Care, Cancer, Specified Health Event, Specified Disease and Critical Illness.
- Non-elective contributions made by the employer towards health Flexible Spending Arrangements (FSA).
- Cost of coverage under an Employee Assistance Program (EAP), wellness program or on-site medical clinic - if the employer charges a premium for the coverage for purposes of COBRA or other federally required continuation of coverage. If the employer is not subject to COBRA or any federal continuation-of coverage requirements, this type of coverage does not have to be reported.
What is considered exempt?
- Dental and vision coverage, if not integrated into the major medical plan. Optional reporting permitted.
- An employee’s contribution to an FSA
- An employer or employee’s contribution to several voluntary supplemental policies does not need to be reported, including: Aflac’s accident, disability, long-term care coverage, standalone dental and vision coverage, and health care spending account contributions (FSAs, HRAs, HSAs and Medical Savings Accounts). Optional reporting permitted for HRAs.
Optional reporting: Though reporting is not required for certain benefits, employers may be permitted to report on certain benefits if they are already incorporated into the COBRA premium, including: an EAP, wellness program or on-site medical clinic without a premium charge, dental and vision plans not integrated into major medical plans, and HRAs.
Aflac’s W-2 reporting tool
- Employers with Aflac have access to the online W-2 Reporting tool through Aflac Business Services. To view and print benefits reports, log in to Aflac Business Services or, if you receive paper statements, sign up today at: aflac.com/business/business_services. This tool, which is for informational purposes only, may be helpful as you prepare for your W-2 reporting of employer-sponsored health care coverage.