New W-2 Reporting Requirements

One of the provisions of health reform included in the Affordable Care Act (PPACA) is the requirement that employers report the value of employee health coverage on the annual W-2 form.  Many questions have arisen regarding the use of a tax-reporting document to report health premiums that are, generally, not taxable income for an employee. The IRS has offered numerous assurances that this new collection of data is intended to be for employee informational purposes only. It is not intended to be a precursor to taxing health benefits.

 Transitional Relief for Smaller Employers

For 2012 Forms W-2, and until further guidance, an employer “is not subject to the reporting requirement for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year.” It’s important to note that an employer may
have fewer than 250 employees yet file more than 250 W-2s. The relief is based on the number of forms filed, not the number of employees employed by the employer.  Employers that file fewer than 250 Forms W-2 are also exempt from filing such returns electronically. The
filing requirement will not apply to future calendar years until the IRS publishes guidance giving at least six months of advance notice of any change to the transition relief.  

The transition relief also applies to:

  • Multi-employer plans
  • Health Reimbursement Arrangements
  • Dental and vision plans that either are not integrated into another group health plan or give participants the choice of declining the coverage or electing it and paying an additional premium
  • Self-insured plans of employers not subject to COBRA continuation coverage or similar requirements
  • Employee assistance programs, on-site medical clinics or wellness programs for which the employer does not charge a premium under COBRA continuation coverage or similar requirements
  • Employers furnishing Forms W-2 to employees who terminate before the end of a calendar year and request a Form W-2 before the end of that year. 

Coverage to Be Reported

The value of health care coverage is reported on the Form W-2 in Box 12. Generally, the amount reported is the actual premium paid by both the employer and the employee during the year.  Employers may also use the COBRA premium, less any administrative fee. If an employee changes coverage or if there is an increase or decrease in premium costs during the year, the W-2 reporting should reflect any resulting change in health plan costs. When a change occurs mid-month, an employer can prorate the amount or use another reasonable method. The standard for determining whether coverage is subject to the reporting requirement is based upon the same standard under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The amount reported should not include the amount of salary reduction contributions to an FSA. HRA amounts can be included, but they are not required. Also, specialized coverage is excluded if it is paid on an “after-tax” basis. 


There are a number of complex situations not covered by this brief overview. In addition, please see the number of resources available on the IRS website including:

2012 Form W-2

IRS Notice 2012-4

IRS Frequently Asked Questions

IRS Form W-2 Informational Reporting Chart,,id=254321,00.html 


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