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How much employee health coverage do you sponsor? The IRS wants to know.

The Affordable Care Act (ACA) brought many changes in healthcare accounting for employers and insurers. Imposed by the ACA, the IRS now requires reporting employer-sponsored health coverage on Form W-2.

Most employers must report aggregate costs of “applicable employer-sponsored coverage” under the group plan on employee W-2s. By requiring employers to report this coverage on W-2s, the IRS hopes to help employees easily compare healthcare costs.

If you offer coverage under a self-insured plan, you aren’t required to report the aggregate cost on employee W-2s. Employers who file fewer than 250 Forms W-2 in the preceding calendar year are also exempt from complying with the reporting mandate.

Aggregate cost includes the insurance cost paid by the employer plus the employee contribution, as well as any amounts the employee paid for anyone covered by the plan, because of his or her relationship to them.

Three methods exist to report aggregate cost for employers: (1) COBRA applicable premium method, (2) the premium charged method and (3) the modified COBRA premium method.

Examples of items you aren’t required to report include:

  • Contributions to HSAs
  • Coverage under a health reimbursement arrangement
  • Long-term care insurance
  • Coverage under a multi-employer plan
  • Coverage provided under a government plan for military members and their families

Employers required to report aggregate costs who fail to do so will be penalized $30-100 per W-2 for incorrectly filing a W-2 with the Social Security Administration, as well as $30-100 per W-2 for furnishing incorrect W-2s to employees.

For more information, visit the IRS website.

Other questions on how the ACA affects your business? Contact the Patrick & Robinson CPAs team for help: or 904-396-5400.

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