Human Resource Services News

W2 Reporting Requirements

:: Deidre Siegel
Director, Human Resource Services
G. R. Reid Consulting Services, LLC
Read about G.R. Reid Human Resource Management Tools


The W2 reporting requirements for large employers will change for the 2012-year, filed in 2013. Employers with more than 250 employees will be required to report the cost of group health care coverage provided to employees. Employers with less than 250 employees will be required to report health care coverage costs in the 2013-year, filed in 2014.  In addition to the small employer exception for 2012, the following additional exceptions will be in effect:

• An employer that contributes to a multi-employer plan is not required to report any coverage costs for such plan
• Indian tribal governments are not required to report
• A self-insured church plan that is exempt from federal health continuation requirements is also not required to report the amount of coverage on the W-2
• The cost of coverage provided by a government entity for the benefit of military members and their families is not subject to reporting.  

If a large employer is not exempt from filing based on the aforementioned exceptions, the system requirements should immediately be examined to ensure compliance. If an employer does not comply, a penalty of $200 per return to a maximum of $3 million per year will be imposed.

Employers are required to report the costs for the covered employee plus the employer cost for any covered dependent and the amount paid by the employee on a pre-tax or after-tax basis. This includes FSA as well if the employee’s health FSA for the plan year exceeds the salary reduction election for the plan year when an employer contributes to the FSA Plan. For example, if an employee elects to contribute $700 to the FSA Plan and the employer matches it, then the employer contribution of $700 must be reported.

The IRS notice also indicates that if the employer charges the same rate to all employees regardless of the scope of coverage, it can report that same cost for all employees. If the employer charges rates based on a coverage tier, the employer can report the same cost for each coverage tier.

In addition, if a former employee has continued coverage for the year under COBRA, this should also be reported on the W2. The IRS Notice states that the cost of coverage must be determined on a calendar year, therefore some COBRA rates will need to be converted to a calendar year amount for purposes of reporting the costs. If a former employee requests a W2 prior to the end of the calendar year, the employer is not required to include the cost of the coverage on the midyear W2.

Lastly, if dental and vision plans are separate coverages and not included within the health plan, these do not need to be reported on the W2. The reporting is solely for health plan coverage and FSA plans when applicable.

The aggregate employer cost is reported in Box 12, using code DD. This reporting is for information only and does not make such amounts taxable.

For further information on the W2 reporting notice, you may visit http://apps.irs.gov/pub/irs-drop/n-11-28.pdf