Starting with the 2012 W-2's to be issued in January 2013, the cost of health coverage for the year must be reported for each employee in Box 12, Code DD. In general, COBRA cost is the value used.  Reporting applies to all group medical plans (grandfathered and not grandfathered), aggregating the value for basic medical, employer "flex" credits in a flexible spending account, on-site clinics, "mini-med" plans and Medicare supplemental coverage furnished by the employer.  Employers required to file fewer than 250 W-2's are exempt.  Guidance has been issued and refines each of the foregoing statements.

          It is a year away.  Why worry now?

It is not a last-minute chore.  It will take planning to account for:

• There are several methods for calculating COBRA value and employers should know which method they are using and if it is sufficient under the W-2 reporting guidance. 
• The value reported must track changes in health coverage for an employee during the year, such as adding or dropping coverage or dependants.  Employers need to ensure their systems, or those of their providers, track these changes.
• The value of health coverage provided to terminated employees is not required until the end of the year W-2, but ensuring that terminated employees are tracked and that the amount reported is correct is important.
• Employers should identify which health coverages must be reported and then determine how the values will be aggregated. Depending on the benefits, multiple providers may need to contribute information.
• Coordination now with payroll and health coverage vendors can make the 2012 W-2 reporting go smoothly.  Amending provider contracts and fee schedules may now allow employers to also negotiate priority treatment at year-end.
• Employers with on-site medical clinics face a number of complex issues and not much guidance, especially on the value of such health coverage.  It will take time to evaluate the options.

Finally, employers should plan a strategy to communicate to employees this information that:

      - has not previously been reported,
      - will be a significant amount but will not be included in any taxable income, and
      - if there is more than one health coverage included, that will be an aggregated
        amount that may be confusing.

After the W-2's for 2011, turn to this project so you are prepared for 2012 reporting.  Your Nelson Mullins ERISA attorney can assist you in evaluating your circumstances and strategy for compliance.