Employer-Sponsored Health Care Coverage
12/01/11
Your employees’ pay must include the value of fringe benefits you provide, unless the benefits are specifically excluded from income by law or are paid for by the employees. The value of these includable fringe benefits is generally subject to Social Security and Medicare Tax (FICA), Federal and state unemployment taxes (FUTA and SUTA), and income tax withholdings.
Employer-Sponsored Health Care Coverage
Under the Patient Protection and Affordable Care Act, employers are required to report the aggregate cost of employer-sponsored group health coverage on an employee’s Form W-2 for tax years beginning after 2010. However, the IRS has announced that reporting for 2011 is optional. For those employers who choose to report the cost of health care coverage on employees’ Forms W-2 for 2011, they should do so in box 12 using code “DD”. The intent is to provide information to employees regarding the cost of their health care coverage. This reporting does not cause the excludable employer-provided health insurance coverage to become taxable.
Reporting the cost of employer-sponsored health insurance coverage will be mandatory for 2012 Forms W-2. However, the IRS has provided transitional relief for smaller employers. Employers that are required to file fewer than 250 2011 Forms W-2 will not be required to comply with the reporting requirements prior to January 2014. Until additional guidance is issued, certain plans are not included in the reporting requirement including multi-employer plans and health reimbursement arrangements (HRAs).