February 12, 2013

What's that new number on my W-2?

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By Diane Stafford / The Kansas City Star

Look closely at your new W-2 form this tax season. Notice Box 12 and a two-letter code, DD.

If you work for an employer with 250 or more workers, information in that box for the first time is required by the Affordable Care Act. It tells how much you and your employer spent on your health insurance premiums.

"It's going to be an eye-opener for a lot of people," says Jerry Nebbia, a health benefits expert in Mercer's Kansas City, Mo., office. "A lot of people have no idea what the true cost is."

The W-2 reporting requirement for health insurance is to expand next year to include employers with fewer than 250 on payroll.

The health insurance benefit amount isn't taxable as personal income -- for now, anyway. But it is insight into your employer's total cost of your compensation.

It also is a close reflection of what you would pay if you lost your employer subsidy and wanted to continue the same coverage under COBRA.

In the workplace at large, the cost of employer-paid benefits equals nearly 31 percent of total employment costs, according to the U.S. Bureau of Labor Statistics. Of that, health insurance costs account for about 7.7 percent of employer costs in private industry and about 11.7 percent in state and local government.

For some workers, employer-sponsored health insurance is a hefty benefit amounting to $5,000, $10,000, even $20,000 a year.

Last year, according to the Kaiser Family Foundation's survey, employer-sponsored health insurance cost an average of $5,615 for individuals and $15,745 for families.

The requirement to include the full health insurance cost on W-2s was conceived partly to make employees more aware of the actual cost of their coverage. Often, employees with employer-subsidized coverage are paying only one-fourth of the full premium cost.

Knowing the real price is important because workers are being asked to be smarter consumers of health care, to make more coverage choices, or to shoulder more of the cost.

Knowing the full cost of health benefits also may help explain why pay raises are smaller than employees would like; sometimes, employers are putting more money into health insurance instead of direct wages and salaries.

If you see the Box 12, DD information, you may have to do some extra work to figure out what your employer's cost was. You may need to look at your final pay stub from 2012 and subtract what you paid for your health insurance from the new DD amount. The difference is your employer's share.

Of note: This box shows only premium costs. It doesn't reflect anything you spent on out-of-pocket health care expenses, your co-payments or deductibles. It also doesn't include money in health savings accounts, and it isn't required to include amounts spent on separate dental or vision plans.

Although your employer's health care contribution isn't counted as taxable income now, the Box 12, DD information lays the groundwork for possible future tax law changes if Congress decides the value of that employee benefit should be taxed.

The tax break for employer-paid health benefits equals about $180 billion a year in potential tax revenue. Analysts say that is worth 80 percent more than the tax break for home mortgage interest deductions.

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Salary and Benefits, benefits, featured, health care, HR

6 Comments

Jacqueline Lubinski on February 13, 2013 2:46 PM | Reply

Why do you think Obamacare included 15,000 new IRS agents and the cost of your employer sponsored health care is on your W-2 form? It doesn't take a rocket scientist to figure out that this will be a windfall for the government when (not if) that now becomes taxable.

Joe on February 14, 2013 10:43 AM | Reply

Oh, good, another way for companies to justify paying you less.

Idaho_Dave on February 16, 2013 9:17 PM | Reply

What we really need is a box that shows how much of your potential earnings are being diverted to pay for executive perks and bonuses. No other workers on planet earth have to drag that much fiscal dead weight around each paycheck.

jimpeel on February 18, 2013 12:04 AM | Reply

If the Obamacare mandate is a tax -- as has been ruled by the SCotUS regardless of the Liberals touting it as a "penalty" -- shouldn't we be able to deduct it from our income taxes?

UpstateNY on February 18, 2013 2:43 PM | Reply

Ask your congress person if they voted for This stupid bill.

Ask how much they read before they voted for it.
Ask how much they have read after they voted for it.

Ask why their health care is exempt.

The silence will be deafening.

Alice Walker on February 20, 2013 12:06 PM | Reply

I turned 55 this year and the amount in box DD has increased 75%. This makes the older worker less attractive to keep on the payroll. I can see this being a real problem for those of us hoping to work until we are 70,

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