Health Insurance Costs and IRS Form W2 - What Exactly Do You Need to Report?

Health insurance coverage that must be reported on Form W-2 includes: 

• The cost of major medical insurance; 
• The health flexible spending allowance (FSA) value for the plan year in excess of the employee's cafeteria plan salary reductions for all qualified benefits; 
• The cost of hospital indemnity insurance, or the amount paid for a specified illness (insured or self-funded) through salary reduction (pre-tax) or by the employer; and 
• Domestic partner health insurance coverage included in gross income. 

Health insurance coverage that does not have to be reported on Form W-2 includes: 

• Health FSAs funded solely by salary reduction amounts; 
• Health savings arrangement (HSA) contributions (employer or employee); 
• Archer medical savings account (MSA) contributions (employer or employee); 
• The cost of hospital indemnity insurance, or the amount paid for a specified illness (insured or self-funded) on an after-tax basis; 
• Accident or disability income; 
• Long-term care; 
• Workers' compensation; 
• Automobile medical payment insurance; and 
• Payments/reimbursements of health insurance premiums for a 2% shareholder employee that was included in the employee's gross income. 

It is optional for the employer to report the following insurance coverage on Form W-2:

• Dental or vision plan not integrated into another medical or health plan; 
• Dental or vision plan which includes the choice of declining or electing and paying an additional premium; 
• Health reimbursement arrangement (HRA) contributions; and 
• Self-funded plans not subject to the federal Consolidated Omnibus Budget Reconciliation Act (COBRA). 

The chart also indicates that it is optional to report the aggregate cost of employer-sponsored health insurance coverage on Form W-2 if: 

1. Employers are required to file fewer than 250 W-2 forms for the preceding calendar year; and 
2. A W-2 form was furnished to an employee who terminated before the end of a calendar year, and the employee requested in writing a W-2 form before the end of that year. 

In addition, it is optional for third-party sick-pay providers that provide W-2 forms to employees of other employers to report the aggregate cost of employer-sponsored health insurance coverage on Form W-2.

Here is a link to the IRS chart.