Duke University sent out their W-2s early last week and mine arrived on Saturday.* It contained all of the usual information. It also contains Box 12-DD with a medium to big number in it.
Box 12-DD is the amount of money that Duke paid for my family’s health insurance in 2019. Every employer that pays for some portion of the group health insurance premium has to report on the W-2 how much they kicked in. This is part of the ACA and the idea behind this is that total compensation is the sum of cash wages (the first couple of boxes on the W-2) plus benefits. One of the biggest pieces of the benefit slice is health insurance. The theory of change on this piece of the law is that if people realize that their health insurance premiums are replacing their cash wages, they would be more willing to make trade-offs between narrower networks, more restrictive plans, or lower actuarial values than they are currently receiving.
That has not worked out too well. I think part of it is that the insurance benefit manager and decision maker for group insurance faces a much different decision problem with very different constraints than an individual buying an Exchange plan or Medicare Advantage. The person in HR faces a budget constraint and a strong scream constraint. They want to make a choice that minimizes the number of people with power yelling at them because their cardiologist or preferred hospital is out of network.
I also think that an annual report is in the odd spot of a lot of information with out it being timely. I pay attention to the deductions on my paycheck. I know why and what is happening when I see my take-home number change. An annual report that has no direct impact on my monthly take-home is non-actionable information. I think it is worthwhile to pay attention to Box 12-DD but if the objective is make people more sensitive to the fact that their employer’s portion of health insurance premiums is coming out of cash compensation, moving that number to the top-line of each pay-stub and then deducting it as a pre-tax deduction would be far more effective as I think that would make the number far more real to people.
** I am not sure when I transformed from doing my taxes in a mad scramble on April 12th type of person to doing my taxes by the Super Bowl type of person but that is who I have become.
Raoul
SCOTUS has not taken up the expedited briefing in Obamacare challenge.
So my cynical take is, the conservative justices will wait till after the 2020 election to drive the stake into ACA.
Mo' Salad
Probably when you stepped aside from refereeing and got rid of that annoying schedule C.
David Anderson
@Raoul: We don’t know:
dr. bloor
Count me as skeptical. Even if workers paid attention to their pay stubs (most won’t), they would (correctly) deduce that even if the employer contribution to health care got smaller, their wages would not get larger.
GregMulka
In my fantasy world we get universal coverage. I get half that money. My employer hires enough people that I don’t get these lovely days of, “Everyone is working uncompensated overtime because you’re all misclassified as exempt but the first person to bring that lawsuit will have to move to a new country to find work so ha ha shove it,” happening every month. None of this will happen in our current gilded age hellscape. Even if the fantasy of universal coverage happened employers would pocket the difference. Mine would tell me it increased by ESOP shares by a whole 2.
I am, as my daughter would say, a bit salty this morning.
GregMulka
@dr. bloor: The IRS did ask me what that number was when filling out my taxes so I had to pay attention to it briefly to reach the same conclusion you did.
Shana
My late father, who was self employed and kept track of all his investments in a ledger – this was all pre-computer era – always did his taxes over New Years. And nagged my brother and I if ours wasn’t done by mid-January, never mind that we never had all our documents by then.
MattF
Yeah, I bought this year’s Turbo Tax yesterday– installed it, transferred the information from last year. Now I’m waiting for tax docs from (at least) four different financial institutions. I’m completely at sea about where this year’s taxes will land, but less painfully, I hope, than last year
ETA: I ‘normally’ file a week or two before the deadline.
daveNYC
Been a while since I’ve done a 1040 myself. Do filers actually have to do something with field 12-DD or is that just there for informational purposes?
David Anderson
@daveNYC: Information only
Mo' Salad
@David Anderson: For now. One of the premises behind tax information reporting is if the payor on a transaction is entitled to a deduction for an expenditure, the payee recipient should report the income. This is why we have 1099s.
At several CPE seminars I have attended since Box 12 DD started a few years ago, some cynical CPAs have surmised that getting employers to get in the habit of reporting this information has been done with an eye to eventually forcing employees to report this income. Hasn’t happened yet, and might not ever. But the reporting regimen is being established just in case.
Mo' Salad
Also, for David, Amir, Randhino, and other footie fans:
Jurgen Klinsmann got hired at Hertha Berlin and almost didn’t get to manage last weekend because he couldn’t find his Continuing Professional Education certificates needed to keep his German coaching license from getting suspended.
As a CPA who, we’ll just say, has had issues with getting caught up with my CPE when getting back into the workforce 10 or 12 years ago, I found this hysterical.
indianbadger
Is that number on 12DD just for me; or is it the average for ALL employees?
For example, I am a single guy and my insurance is X per paycheck. I pay a portion and my employer pays a portion; say X=A+B.
My co-worker is married and his family of four is Y per paycheck. Employer pays D and co-worker pays C; Y=C+D.
Is the number on my paycheck the B portion ; or is it (B+D portion for all employees)/ (number of employees)?
If it is just my portion of B, it doesn’t make sense for me. Because that means, quoting from my current W2, that my employer is paying twice what I am and that does not sound right. I thought at the most it is a 50/50 split.
WaterGirl
@Mo’ Salad: WordPress does not like apostrophes in nyms. I am sorry to have to break it to you, but unless you give up the apostrophe, every single one of your comments will have to be approved before they will show up in the threads. :-(
That was the case with the previous site, and it’s true on the new site, too. That’s because its a basic WordPress thing.
daveNYC
@David Anderson: Ah, well than that would be a thing then. Lots of numbers on a W-2, so if you don’t force the person to interact with a specific box then they’re probably not even going to pay attention to it.
David Anderson
@indianbadger: Your specific amount.
noname
@David Anderson: David, off topic, but doesn’t every state have a department or office that oversees health insurance companies? I am getting nowhere with the insurance company itself, and the HR people at my employer are useless. Thanks!
David Anderson
@noname: Either the Attorney General’s office of the State Insurance Commissioner will by your next step
From Both Sides of the Pond
My taxes started getting done early the instant I had child-related expenses and child-related deductions.
noname
@David Anderson: Thank you.
Mo' Salad
@WaterGirl: But then the joke dies. I’m an overweight Liverpool fan whose wife insists on me making better food choices.
Thanks for the explanation. I’ll come up with something.
WaterGirl
@Mo’ Salad: I told you I was sorry to have to break the news. :-)
sheila in nc
@indianbadger: I don’t know your numbers but I suspect it is just for you.
For me, the breakdown appears in every pay stub. My excellent boss pays roughly twice my contribution to my (self + 1) health insurance premium.
debbie
@indianbadger:
I pay about 20% compared to the total cost. Of course the deductibles are practically insurmountable.
indianbadger
@David Anderson:
thank you.
Leumas
As a professional tax preparer, I have never had anyone ask what the DD code in box 12 represented.
A couple of times I have pointed out to clients what is represented, mostly to their shock and amazement.
TC
I think you are confused. The amount in Box 12 coded ‘DD’ is the TOTAL cost of Health Insurance premiums including what you have deducted (pre-tax) as well as what the employer subsidizes which is also not taxed. Apparently your employer pays 100% of your health benefit, but most employees are paying around 30%.
So your suggestion to move “that number to the top-line of each pay-stub and then deducting it as a pre-tax deduction” is sort of what’s happening now. I agree with the sentiment that this Obamacare requirement might be a good example of a good intended bad idea. I work in the HR software industry and can tell you that even this seemingly minor additional reporting requirement costs millions in aggregate across all employers. For what? Some info that no-one really reads anyway.