If an employer filed more than 250 W-2 forms during the prior year, the aggregate cost of coverage must be included in box 12, using Code DD, on each employee’s W-2. Specifically, the requirement to report is based on how many W-2 forms were filed under each EIN for the previous calendar year.
For example, if an employer filed more than 250 W-2s under one EIN in 2021, then they must report the aggregate cost of coverage for 2022. In contrast, if the company has separate EINs and each EIN filed less than 250 W-2s during 2021, this requirement wouldn’t apply.
The total cost of coverage includes both the employee and employer contributions of the employer-sponsored major medical coverage for fully-insured and self-insured plans. Generally, this would be the amount invoiced for each covered employee for a fully-insured plan, or the COBRA equivalent rates (minus any 2% admin fee) for self-insured medical plans. This would also include any prescription drug coverage or dental or vision coverage that’s combined with medical coverage.
The total cost of coverage does not include any standalone dental or vision plans, group life or disability coverage, individual worksite products, health FSA elections, HRA benefits, HSA contributions nor long-term care. But in some cases, an EAP, on-site clinic or wellness benefit may need to be included in the reportable amount if these programs provide medical care.
Note that the information reported on the W-2 is informational only and does not affect taxable income or any other amount reported in other boxes on employees’ W-2s. However, if an employer fails to report this information or includes incorrect amounts, then amended W-2 forms must be filed with the IRS.