2015 W-2s: Include Health Coverage Costs

The Affordable Care Act (ACA) requires employers to report the cost of employer-sponsored health coverage on 2015 W-2s. This reporting system means that a Form 1095-B or 1095-C must be prepared for each applicable employee and the forms filed with the IRS by February 28, 2016.

This requirement applies to employers that provide "applicable employer-sponsored coverage” under a group health plan, and includes businesses, tax-exempt organizations, and governmental entities, with the exception of plans for members of the military and their families.

How and Where to Report ACA Payments on the W-2

You report the value of health care coverage in Box 12 on Form W-2, with Code DD to identify the amount. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee.

Amounts that employers must report:

  • Major medical
  • Health Flexible Spending Account value for the plan year
  • Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer
  • Domestic partner coverage included in gross income
  • Other coverages under employer-sponsored healthcare coverage, if employer charges a COBRA premium:
    • Employee Assistance Plan
    • On-site medical clinics
    • Wellness programs

Other Coverages Not Subject To Reporting

Many other health-related benefits do not require reporting, and some may be reported on an optional basis. This includes dental, vision, long-term care, accident and disability income, and others.

What To Do Now

In light of the complexity of the new reporting requirements, employers should take the following actions:

  • Learn about the new reporting requirements by reading IRS Publication 5196. Review the instructions for Forms 1094-C and 1095-C and for Forms 1094-B and 1095-B.
  • Perform an audit of affiliated businesses and their ownership to determine applicable large employer group members.
  • Discuss the reporting requirements with your health care insurer or third-party administrator and your payroll vendor to confirm the parties responsible for data collection and form preparation.
  • Verify that procedures are in place for determining and documenting each employee’s full-time or non-full-time status by month, and offers of health coverage and enrollment by month.
  • Ensure that systems are in place during 2015 to collect the needed data for the forms.

Need More Details?

If you have any questions about this new reporting, or any other requirement under the ACA, just give us a call.
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