PPACA requires employers to report the total cost of benefits on an employee’s W2 in Box 12 and it should include the employer and employee portions. The purpose according to the IRS is “to provide employees useful and comparable consumer information on the cost of their health care coverage” and is not used for any tax or other IRS calculation. There are many factors which make reporting complex including carrier wash rules as they apply to life events, new hires and terminations as well as employer contribution policies. Employee Navigator has used our extensive industry expertise in the development of this report. There may be life events or other instances which will have a small impact on the calculation; however we feel any impact is minor and will not violate the spirit or letter of the law.
This report calculates the estimated benefits costs through the end of the calendar year based on the elections at the time that the report is being run.
Employee Navigator uses default carrier wash rules of the 15th. When a new hire’s coverage effective date is on or before the 15th of a given month, the calculation includes premium for the entire month. As for terminations, if the employee’s coverage end date is on or before the 15th, then a premium is excluded from the calculation. You may fine tune the calculations by adding the carrier wash rules on the plan set-up area for each plan. Employers wishing to improve the accuracy of the W2 reporting should consider investigating their payroll providers reporting capabilities.
See IRS website for more details: http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage