W-2 Reporting in New York

New York employers and plan sponsors have new obligations under the recently-enacted health care reform laws and related guidance to report the aggregate cost of employer-provided health care coverage on an employee’s Form W-2.

The IRS issued Notice 2010-69 which made this requirement optional for the Form W-2 for the 2011 calendar year. A New York employer must report the aggregate cost of employer-provided health care coverage on your employee’s Form W-2 for tax years beginning on or after January 1, 2012.  These are the Form W-2s an employer provides to employees in January 2013.  On March 29, 2011, the IRS issued Notice 2011-28 to exempt small employers from the Form W-2 reporting requirement and provides guidance to non-exempted employers on how they should comply with the rules.  Small employers are those filing fewer than 250 Form W-2s.

When reporting the cost of health care coverage on Form W-2, use code “DD” in box 12. The Form W-2 reporting obligation is for informational purposes only.  It is to let employees know the cost of their health care coverage.  The reporting does not cause otherwise excludable employer-provided health coverage to become taxable.

The aggregate cost of “applicable employer-sponsored coverage” must be reported on the Form W-2. “Applicable employer-sponsored coverage” means group health plan coverage that an employer makes available to the employee that is excludible from the employee’s income under Section 106 of the Internal Revenue Code, but does not include the following:

  • long-term care;
  • accident or disability income, liability, workers’ compensation, automobile medical payment, and credit-only insurance, and other similar coverage;
  • stand-alone vision and dental plans; and
  • specified disease or illness and hospital indemnity or other fixed indemnity insurance.

The “aggregate cost” of health care coverage that must be reported on the Form W-2 is “the total cost of coverage under all applicable employer sponsored coverage.” Aggregate cost includes the portion of the cost paid by the employer and the employee, whether pre-tax or post-tax, for coverage for the employee and dependents, but excludes:

  • amounts contributed to an Archer MSA, HSA or HRA,
  • employee contributions to a flexible spending arrangement (FSA), and
  • amounts contributed under certain plans maintained primarily for members of the military.

But, if the amount of the health FSA for the plan year exceed the employee’s contributions, then the amount of the health FSA, less the employee’s contributions, is included in the aggregate cost reported on the Form W-2.

Contact an experienced New York tax attorney for advice on corporate tax reporting.