Under the Affordable Care Act (ACA), employers must report the cost of employer-sponsored health care coverage on an employee’s W-2. This W-2 reporting is informational only, intended to provide useful details on the value of an employee’s health care benefits. At the same time, this reporting does not mean that coverage is taxable; rather, this amount continues to be excluded from an employee’s taxable income.
According to the most recent IRS guidance, large employers who issue 250 or more W-2s for calendar year 2014 (to be distributed to employees in January 2015) are required to report the value of employer-sponsored health insurance. Though mandatory for these employers, the reporting is optional for small employers, or those who issue fewer than 250 W-2s. In fact, if you’re a small employer, you’ve qualified for transition relief from this reporting requirement from tax year 2012 to date, until the IRS issues new guidance.
Specifically, the reporting applies to employers who provide “applicable employer-sponsored coverage” under a group health plan. This includes private companies, churches, tax-exempt organizations, and federal, state and local government entities.
Consult a qualified tax professional for additional direction. Keep in mind, too, that the IRS’ small employer exception continues until the agency publishes new guidance, which would apply only to calendar years starting at least six months after the change.