With the new year, the period for filing 2023 W-2s is about to begin. This is an excellent time for employers, including governmental entities, churches, and religious organizations, to remember ACA requirements for reporting Health Benefit costs in Box 12DD on each employee’s W-2.
Note: This 12DD reporting requirement only applies to an employer who issues 250 or more W-2s for 2023 by each unique FEIN.
For example, if there are five companies under common ownership/control with different FEINs, but only one will issue 250 or more W-2s for that company’s employees for 2023, then only that one employer will need to do 12DD reporting.
Some Questions That Usually Up
Is the employer reporting on just what the employer pays or what the employee and employer pay?
The amount reported for each employee is both what the employee pays (if anything) and what the employer pays. It could vary by employee based on the plan selected, the tier of coverage, and mid-year renewals.
Is this considered taxable income?
No. Coverage under any group health plan provided by an employer that is excludable from the employee’s gross income under Internal Revenue Code 106 that provides health care to the employees, former employees, the employer, others associated with the employer in a business relationship, or their families must be reported on the W-2.
How to calculate what is included in 12DD for each employee
Calculating the cost of coverage for each employee varies based on how the plan is funded.
Fully-Insured
Premium charged method (for insured plans only): reportable cost is the premium charged by the insurer for that employee’s coverage for each period. (i.e., the reportable premium would be the single-only coverage premium or the family coverage, as applicable to the employee)
Self-Funded
COBRA applicable premium method: Use the same rates charged for COBRA coverage, less any COBRA administration fees. (i.e., do not include the 2% or 50% administration fee)
Can they simply list the same amount for each employee?
No. The amount that goes into 12DD is unique to that employee and could vary based on the tier of coverage, the plan selected, and the number of months covered during 2023. Remember that the amount will change based on mid-year plan renewals.
For a resource to help calculate your totals, try this easy-to-use spreadsheet:
Link to Excel Workbook
Coverage to Report
See the table below for details on which coverage to report (or not report) on Form W-2, Box 12
using code DD:
| Coverage Type | Reporting Required | Do Not Report | Optional |
|---|---|---|---|
| Major medical | |||
| Dental or vision plan not integrated into another medical or health plan | |||
| Pre-tax salary reductions to a Health Flexible Spending Account (FSA) | |||
| Health Reimbursement Arrangement | |||
| Health Savings Account (HSA) contributions (employer or employee) | |||
| Hospital indemnity or specified illness, paid through pre-tax salary reduction, or by employer | |||
| Employee Assistance Plan (EAO) providing applicable employer-sponsored healthcare coverage |
(if employer charges a COBRA Premium) |
(if employer charges a COBRA Premium) |
|
| On-site medical clinics providing applicable employer-sponsored healthcare coverage |
(if employer charges a COBRA Premium) |
(if employer charges a COBRA Premium) |
|
| Wellness programs providing applicable employer-sponsored healthcare coverage |
(if employer charges a COBRA Premium) |
(if employer charges a COBRA Premium) |
|
| Accident or disability income | |||
| Long-term care | |||
| Domestic partner coverage included in gross income |
Click here for additional information from the IRS on other types of coverage to determine whether or not to report.
Calculation of related health plan expenses for W-2 Reporting Purposes
If an employer has an onsite medical clinic or other benefits integrated into their health plan (like EAP or standalone telemedicine), they will need to incorporate the cost of these related health plan services into the cost for Box 12-DD reporting as well.
The best method to determine how much needs to be added to the cost of health insurance or health benefit plan would be as follows:
Employer determines the cost spent during 2023 for the following services:
- Employee Assistance Programs
- Wellness Program
- Onsite Medical Clinic
- Telemedicine or Virtual Program
To determine the per-employee monthly cost factor (MCF) to be assigned for these services, EMPLOYER will use the following calculation:
Once established, the MCF shall be included for W-2 Reporting purposes as follows:
- For each employee who was covered under EMPLOYER’s group medical plan during the prior calendar year, the MCF shall be added to the premium or premium equivalent for each month that employee was employed by Employer;
- For all other employees, the MCF shall be reported as the group health plan expense on the W-2 for each month the employee was employed by Employer during the prior calendar year.
Relevant Period
The reportable cost under a plan must be determined on a calendar year basis (even if the 12-month determination period is not the calendar year). If the coverage cost increases or decreases during the calendar year due to mid-year renewal or change in coverage, the reportable cost must reflect the increase or decrease for the applicable periods.
For example, if an employee changes coverage during the year, the reportable cost under the plan for the employee for the year must reflect the change in the cost of coverage for each period, and the employer should report the costs for the coverage elected by the employee for the periods for which such coverage is elected.
For the coverage periods that include December 31 but continue into the subsequent year, employers may:
- Treat the coverage as provided during the calendar year that includes December 31
- Treat as coverage during subsequent year
- Allocate costs between years
Which Items Should Not Be Included in Box 12DD Reporting?
- Stand alone dental and vision plans which are not integrated with a group health plan
- Health savings account (HSA) contributions
- Health reimbursement arrangements (HRA) contributions
- Pre-tax salary reductions to a health flexible spending account (JSA)
- Employee assistance program (EAP), wellness or on-site medical clinic if the employer does NOT charge a COBRA premium for these benefits
- Archer MSA contributions
- Long-term care
- Premium payments for 2% share-holder employees of S Corporations
- Costs for accident or disability income insurance, liability insurance including general and automobile liability insurance, supplement to liability insurance, hospital indemnity, other fixed indemnity or coverage only for a specificized disease or illness that are includable in the employees’ gross income or are NOT paid by employees on a pre-tax basis under a Section 125 cafeteria plan amounts included in income for 105(h)
Penalties
Violations of the W-2 healthcare reporting requirements are subject to existing rules and penalties on filing Forms W-2, which can be found on the IRS Form W-2 Instructions:
See IRS Form W-2 Instructions
New Electronic Filing Requirements
On a related note, employers that file 10 or more tax information forms of any type to the IRS in a calendar year are required to file electronically, beginning in 2024. This change includes adding together all Form W-2, Form 1094-B/1095-B, Form 1094-C/1095-C, and Form 1099, amongst other tax forms, and will likely impact nearly all employers, who will now be required to file electronically.
Click here for an eBen article detailing these new electronic filing requirements in 2024 for all tax information forms, if the number filed is at least 10.
Employer Action
Employers that file 250 or more Forms W-2 are advised to take action now to ensure they are in compliance with the W-2 reporting requirement by identifying the applicable employer- sponsored coverage provided to each employee and calculating the aggregate cost of that coverage to report.
The deadline for filing (and furnishing to employees) Forms W-2 is January 31, 2024.
Reach out to your eBen account team with any questions or contact us directly:
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