Employer reporting and notification requirements

Understanding employer reporting and notification requirements under the ACA

What your clients need to know

Under the Affordable Care Act (ACA) , some employers must follow certain requirements around reporting and eligibility. Read on to learn more about W-2 form reporting requirements, employee notification of coverage options, and more.

W-2 form reporting requirements

The ACA requires employers—fully insured and self-funded groups with grandfathered and nongrandfathered plans — to report the cost (including any employee contribution) of employer-sponsored health benefits on their employees’ W-2 forms.

The amount reported is informational only—it doesn’t change the status of health care coverage that’s otherwise tax-exempt.

Q: Why are my clients required to provide W-2 reporting?

A: It helps current employees understand the cost of their coverage. Your clients should be aware that this requirement is for informational purposes only — while the cost of coverage will be reported on W-2 forms, it won’t be taxable. Also, employers aren’t required to provide this information to individuals who receive health care coverage but don’t normally receive W-2 forms, such as retirees.

Q: What types of benefits are my clients required to report?

A: Some types of coverage aren’t subject to this requirement, including dental-only coverage, amounts contributed to an HSA, HRA, or Archer MSA, and the amount of any salary reduction election to a health FSA.

The IRS has a chart that shows what types of coverage your clients need to report, but employers should consult with their legal and tax advisors when preparing their W-2 forms.

Q: Are all employers required to provide this information?

A: According to IRS Notice 2012-9, employers who filed fewer than 250 W-2 forms in the preceding calendar year aren’t subject to this requirement at this time.

Employee notification of coverage options

Employers subject to the Fair Labor Standards Act (FLSA) are required to provide existing employees and new hires with a written notice that explains:

  • what the health insurance exchanges are, the services they provide, and how to contact the exchange for assistance
  • that the employee may be eligible for a premium tax credit if the employee purchases a qualified health plan through the exchange
  • that the employee may lose any contribution the employer may make toward the group health plan if the employee purchases a plan through the exchange, and that some or all of that contribution may be excluded from income for federal income tax purposes

Employers may also provide additional information in the notice, such as whether the employer’s plan covers at least 60 percent of the cost of essential health benefits. To determine if your client’s business is subject to the FLSA, visit the Department of Labor (DOL) online or consult your legal advisor.  

Q: When are my clients required to send this notice to their employees?

A:  According to interim rules issued by the DOL on March 8, 2013, employers were required to provide written notification to their current employees no later than October 1, 2013. Employees hired after October 1, 2013, must be provided notification within 14 days of their start date.  

The DOL has provided model language your clients can use to meet the notification requirements:

Additional employer requirements

Automatic enrollment for employees of large employers
Employers who have more than 200 full-time employees and offer at least one health plan will be required to:
• automatically enroll newly hired full-time employees following any waiting period
• continue enrolling current employees
• give employees notice and the opportunity to opt out of any coverage in which they were automatically enrolled

This information is designed to provide a general overview of portions of the Affordable Care Act and should not be relied upon as legal or tax advice. Federal and state laws and regulations are subject to change. Seek professional advice regarding how the new requirements will affect your particular circumstances from an independent tax advisor or legal counsel. Information may have changed since publication.