Confused About The W-2 Reporting Guidelines?

On January 3, 2012, the IRS released additional guidance for employers regarding the W-2 health benefits cost reporting. Questions previously voiced about voluntary benefits and how they fit have been answered:

Q&A number 37 in IRS Notice 2012-9 explains:

Only when employers make some contribution to the cost of coverage, or employees purchase coverage on a pre-tax basis under a Section 125 cafeteria plan, will employers have to include the value of supplemental health benefits, such as hospital indemnity, critical illness, cancer or other specified disease insurance, in their W-2 reporting.

Employers do not have to include the cost of supplemental health benefits that the employees pay entirely with after-tax dollars, according to the notice.

What Must You Report?

  • Medical plans
  • Medicare supplemental policies
  • Prescription drug plans
  • Dental or vision plans that are integrated into a group health plan so that they are part of the same insurance policy, contract or certificate of insurance.

It will be reported in Box 12 under Code DD. In general, the W-2 reporting requirements mean employers will need to explain the benefits reporting employees see on their W-2s, so employees understand they are not being taxed on their benefits coverage.

*This is informational only, it does not cover all the guidance, issues and requirements surrounding the W-2 health plan cost reporting, nor does it constitute legal or accounting advice.

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