IRS clears up W-2 health cost reporting rules

The latest round of IRS guidance helps answer questions employers have raised about the requirement to report the cost of workers’ health insurance on W-2s.

The healthcare reform law mandates that employers that issue more than 250 W-2 forms for tax year 2012 must include on those statements the cost of employees’ healthcare coverage.

Employers issuing fewer than 250 W-2s are exempt from this rule until it comes time to pass out 2013 W-2s — and possibly longer.

Points of clarification in the latest guidance:

• Employers can — but aren’t required to — report contributions made to health reimbursement arrangements
• The cost of services provided through employee assistance programs (EAP), wellness programs or on-site medical clinics is not required to be reported — unless the employer charges premiums for those services to COBRA beneficiaries
• Any coverage that is taxable to employees — like coverage for children over the age
  of 26 — must be reported
• The cost of any supplemental health benefits — like cancer insurance — must be reported
• Contributions employees make to flexible spending accounts are not to be included, and
• The reporting requirement does not apply to Indian tribal governments.

One thing you may want to remind employees when they see this new figure on their W-2s: It’s for informational purposes only. The cost of coverage will remain untaxed.