Form W-2 Reporting Provision

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The Form W-2 reporting provision of Health Care Reform is intended to help employees better understand their employer-provided benefits and the true cost to obtain health coverage. This provision requires employers filing 250 or more Forms W-2 in the previous tax year to report the total value of certain employer-sponsored health benefits on employees’ forms.

This provision is optional for businesses filing less than 250 Forms W-2 in the previous tax year. The health care amounts reported on the W-2 are strictly informational and not taxable to the employee.

There are three methods to calculate the value of coverage to be reported. The method selected will depend on your particular business situation, such as being self-insured, partially self-insured, or if you obtain coverage through an insurance carrier.

  1. Premium Charged Method: Used only for an employee covered by an employer’s insured group health plan. The employer relays the premium that the insurer charges for the employee’s coverage for the period.
  2. COBRA Applicable Premium Method: Must be used by those with self-insured plans. The employer calculates the applicable COBRA premiums to determine the reportable cost on Forms W-2, excluding the 2 percent COBRA administrative fee. If using a composite rate to determine the premium for active employees, but not to determine the applicable COBRA premium, employers may use the composite rate or applicable COBRA premium to determine the aggregate cost of coverage as long as the method is used consistently.
  3. Modified COBRA Premium Method: An employer may use this method when it subsidizes the cost of COBRA coverage. The amount reported is based on a reasonable good-faith estimate of the COBRA applicable premium for each period if the estimate is used to establish the subsidized COBRA premium. As an alternative, employers may report the COBRA applicable premium from each period in the prior year if that is the premium charged in the current year.

Employers are not required to issue Forms W-2 to non-employees currently receiving health coverage (such as a retiree or surviving spouse), and are not required to include the following in the calculation of reportable costs:

  • Standalone dental and vision plans
  • Employee Assistance Programs (EAPs), wellness programs, and onsite medical clinics when offered to qualified COBRA beneficiaries at no charge

EAPs, wellness programs, and onsite medical clinics can be excluded from reported costs if the employer does not charge a premium when these services are offered to qualified beneficiaries through COBRA.

Paychex Solutions for W-2 Reporting Requirements

Through coordination between Paychex Payroll and Paychex Insurance Agency services, your health insurance premium costs we have on file could be added to Box 12 on the W-2. We can also notify you if your business filed more than 250 W-2s in the previous calendar year.

Insurance is available through Paychex Insurance Agency, Inc., 150 Sawgrass Dr., Rochester, NY 14620. CA license #0C28207. 877-266-6850.

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