W-2 Reporting of Employer-Sponsored Health care

Annual health care cost reporting 

The Affordable Care Act (ACA) requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD.

The amount reported does not affect the employee’s tax liability, as the value of the employer contribution continues to be excludible from an employee’s income, and is not taxable. This reporting is beneficial for employees because it shows the value of their employer-sponsored health care benefits.

More information about the reporting, and which employers are, or are not, required to report this on the Form W-2 can be found on the Form W-2 Reporting of Employer-Sponsored Health Coverage page on the IRS website.

The IRS website includes Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers, which may help you address clients’ questions, or you may want to contact the WBCompliance professionals via email at compliancesupport@wordandbrown.com or by telephone at 866.375.2039.

Additional ACA Reporting
The ACA also added sections to the Internal Revenue Code (IRC) that specifically relate to informational reporting to the IRS by employers regarding ACA-compliant health insurance offered – or not offered – to employees. 

Section 6056 of the IRC requires annual information reporting to the IRS by Applicable Large Employers with fully insured plans

Employers must report whether they offer or do not offer Health Insurance to Full-Time Employees and their dependents. 

Section 6055 requires annual information reporting to the IRS by Health Insurance issuers, employers with self-insured plans, government agencies, and other providers of Health coverage.

Employers are required to give employees a copy of the information reported for them on or before January 31 of the following year.

The IRS uses these annual reports to determine whether or not an ALE has to pay any penalties and whether employees are eligible for Premium Tax Credits.

The IRS Section 6056 Reporting Data Calculator can help you calculate the employee-only portion of the lowest cost plan offered by the employer with minimum value; information required for completion of IRS Form 1095-C. This calculator also provides a final “affordability” check, so adjustments can be made to avoid an entire year of employer penalties.