Health Care Cost Disclosure

Posted by: Carrie Minnich

Beginning in 2011, employers will have the option to report the cost of employer sponsored health coverage on Form W-2. The Affordable Care Act is giving employers a chance to update their payroll systems before the Act requires the disclosure in 2012. Those employers that issue 250 or more W-2s for 2012 in 2013 will be required to disclose on the employee’s W-2 the cost paid by the employer and the employee for health care coverage on the employee’s W-2. Employers that issue less than 250 W-2s in 2012 are not required to make the disclosure but have the option to. Beginning in 2013, for W-2s issued in 2014, all employees will be required to include the healthcare cost on W-2s. The cost of healthcare to be disclosed on the W-2 is not taxable, as it has been in the past. The amount is for informational purposes only to inform employees of the cost of their health coverage.

Summary of Healthcare Cost Disclosure

Who? 
All employers, including nonprofit organizations, churches and government entities. Federally recognized Indian tribal governments are excluded.

What? 
The cost of coverage under a group health plan that the employer makes available to the employee that is non-taxable to the employee (or that would have been non-taxable if the coverage were employer-provided). Cost includes both the portion paid by the employer as well as the portion paid by the employee.

When? 
2011 W-2s issued in 2012 – Optional for all employers. 
2012 W-2s issued in 2013 – Required for all employers issuing 250 or more W-2s and optional for  employers issuing less than 250 W-2s. 
2013 W-2s issued in 2014 – Required for all employers.

Where? 
Box 12 of Form W-2 under code DD (Cost of employer-sponsored health coverage)

Why? 
To provide useful information to employees on the cost of their healthcare.

Although the disclosure is not required in 2011, this might be a good time to start thinking about how to track healthcare costs for your organization.