Is the Form W-2 reporting requirement still in effect, and what types of coverage must be reported?

Yes, the Form W-2 reporting requirement remains in effect, despite President-elect Trump’s call to repeal PPACA once he takes office. As background on the requirement, PPACA requires employers to report the aggregate cost of applicable employer-sponsored coverage on their employees’ Forms W-2. Employers that file fewer than 250 Forms W-2 are not required to report. In addition, the reported aggregate cost is for informational purposes only (it does not mean the costs are taxable). The requirement went into effect in 2012, and so it should not be news to employers. But it does continue to raise questions for some employers with regard to the reportable coverage types and costs.

With respect to reportable coverage types, major medical coverage is the primary reportable coverage type. This includes any employer-sponsored major medical plan, both fully and self-insured, such as a PPO, POS or HDHP. It would also include prescription drug coverage and any dental/vision coverage that is combined with major medical coverage. But it would not include coverage that is considered ‘excepted benefits’ (those not subject to HIPAA, and thereby exempt from PPACA), including stand-alone dental or vision plans, non-coordinated and independent benefits (such as hospital indemnity or specific-illness plans), and health FSA salary reduction elections (but there are special rules regarding optional employer flex credits that could be used to contribute to an FSA). HRAs, HSA contributions, long-term care and coverage under Archer MSAs also are not included.

Employers will want to review their EAP, wellness and on-site medical clinic arrangements and programs—if COBRA applies to those plans, then they will need to be included in the reportable cost. Whether COBRA applies is a bit trickier analysis, but it basically comes down to whether the EAP, wellness program or on-site medical clinic is providing medical care. Employers should work with outside counsel in making that determination.

With respect to determining the reportable cost, employers should remember that both employer and employee portions of the cost should be included, and that there should be no adjustment for imputed income amounts. As far as actually calculating the cost of coverage, the general method is that the reportable cost equals the COBRA applicable premium for the period—whatever the employer charges for COBRA. Employers with fully insured plans may also use the employee and dependent premium charged by the insurer for the coverage period. Lastly, employers that subsidize the cost of COBRA may report a reasonable good-faith estimate of the full cost (this approach recognizes situations in which an employer with a self-insured plan subsidizes the COBRA cost by underestimating the actual cost of health benefits). Regardless of the method, all plans must report on a calendar-year basis. Finally, if an employee commences, changes or terminates coverage during the year, the reported cost must reflect the actual periods of coverage.

Employers should review their obligations under this requirement with their advisor. In addition, the IRS has provided some helpful FAQs on the topic, here.