How does an employer determine if they are over the 250-form threshold for the Forms W-2 reporting requirement? And if over the threshold, what types of coverage must be reported?
Generally, the count is based on the number of Forms W-2 filed under each separate EIN for the previous calendar year. To determine if an employer must provide the cost of coverage for 2018, the employer would look back and determine if they filed fewer than 250 Forms W-2 under their EIN in 2017. If less than the 250-form threshold, then they wouldn't be subject to the Form W-2 cost of coverage reporting for 2018, even if they are self-insured.
Please note that the aggregation/controlled group rules don't apply when it comes to the 250 threshold for the Forms W-2 reporting requirement. This means that if there are entities that have different EINs and that separately file their Forms W-2, their employees can be counted separately. So, if each EIN corresponded to less than 250 Forms W-2 in the prior year, the reporting requirement would not apply. However, if the entity is set up with different divisions within the same EIN, then they would have to look at the entire employee count for this reporting requirement.
If an employer did file more than 250 Forms W-2 during the previous year, what coverage costs are included within the report? The total cost of coverage to be included is the employee and employer contributions that are excludable from the employee's gross income under IRC Section 106 (or that would be excludable if it were paid by the employer). This includes employer-sponsored major medical coverage, both fully and self-insured (e.g., PPO, POS or HDHP). It would also include prescription drug coverage and any dental/vision coverage that is combined with major medical coverage.
An employer would not report any "excepted benefits" (those not subject to HIPAA, and thereby exempt from ACA), 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 also want to review their EAP, wellness and on-site medical clinic arrangements and programs. If COBRA applies to those plans, then the cost of these programs 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.
If the employer continues to have questions, they should review their obligations under this requirement with their advisor or legal counsel. Additionally, the IRS has provided a Q&A; (
) to assist employers in both determining whether they are subject to the reporting requirement and calculating the total cost of coverage. You can also download PPI's Form W-2 Whitepaper