This regulation takes affect as optional in tax year 2011. This reporting is for informational purposes only, to show employees the value or cost of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee's income and it is not taxable.
The 2011 Fundware W2 Parameter has been changed to allow you to extract data items to Box 12 where this information can be reported. Field 37 of the Federal Parameter s labeled Misc DD ACA and allows entry of up to 10 data items to record both the employee health care deduction and the employer health care benefit. (total cost of Health Care).
From the IRS Questions and Answers Document on Affordable Care Act:
7. What amount should the employer report on the Form W-2 for health coverage? The amount the employer paid? The amount the employee paid? Or both?A. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. In the case of a health FSA, the amount reported should not include the amount of any salary reduction contributions. See Notice 2011-28 for more detail on the interim rules that apply to reporting contributions to a health FSA.
You will already have the Employee portion (deduction) set up on your system, and may have been tracking the Employer portion previously.
To track the Employer Portion in Fundware an historical data item (Type Other, which is a benefit), can be set up to record what the employer is providing for health care. That historical data item or items are then added to the W2 Federal Parameter. For further information, see our Knowledgebase doc on how to set up Benefits.
The updates to the W2 parameter will be included in the Year End Service Bulletin download for 2011, scheduled for mid-December.
Be sure and subscribe to Financial SoftWare Release Announcements to be notified when YE2011 is available for Download.
If you would like to set up a data item to add the deductions and Benefits together to report as Affordable Care on pay stubs or you have more than 10 data items involved, see How to Add Data Items together for one Affordable Care Act Data Item.