While third-party administration firms are well known forproviding comprehensive administration services to employee benefitplans, brokers and agents, employers and plan sponsors may not beaware of how well suited TPAs are to handle the upcoming abundanceof reporting and disclosure rules under health care reform.

W-2 health care value reporting

Health care reform requires employers to calculate and reportthe aggregate cost of employer-sponsored health coverage on W-2forms. This requirement was originally scheduled to take effect for2011 W-2s, but the IRS made this optional for 2011. Employers must be prepared to comply for the 2012 W-2s. At firstglance, this reporting rule seems straightforward, but upon closeexamination of the IRS guidance (IRS Notice 2011-28), you'll seethat there are many complicated nuances. 

Monthly tracking of eligibility is needed as the reportable costfor the employee for the year must take into account any change incoverage, such as a family status change, or termination orcommencement of coverage. 

Many employers offer multiple plans with multiple options,provided by a variety of vendors. Cost valuations for thesedifferent plans must be gathered and aggregated on the W-2.

Timely gathering this information will be critical. Sinceemployers must issue the W-2 forms by the end of January and thehealth care valuation must reflect the value of coverage throughthe end of the calendar year, this leaves about a week to producethe numbers for the payroll companies to process the W-2s.

Calculating the value of employee assistance programs andon-site medical clinics is required.

These are just a few of the many complexities in W-2 health carevalue reporting. Are employers really prepared to handle this in acost-efficient manner? Probably not. TPAs are uniquely situated tohandle this and are leaps and bounds ahead in their understanding.They maintain the plan enrollment information and have expertise invaluing health care coverage for COBRA purposes. TPAs whoparticipate in the Society of Professional Benefit Administratorshave interacted directly with the IRS regulation writers on theintricacies of the IRS guidance and have an insider advantage.

Reporting in 2014

Even more reporting will go into effect in 2014. Health carereform requires employers with 50 or more full-time employees toreport the following information to the IRS. 

Whether the employer offers an employer-sponsored plan.

The length of any waiting period.

The monthly premium for the lowest cost option in eachenrollment category. The employer's share of the costs of benefitsprovided. The option for which the employer pays the largestportion of the cost and the percentage of cost paid by the employerin each enrollment category. The months during which coverage wasavailable. The number of full-time employees for each month duringthe calendar year.

The name, address and TIN of each full-time employee, and themonths during which the employee and any dependents were coveredunder the health plan.

This information must also be furnished to each individual byJanuary 31.

We've touched on some of the new reporting tasks that willimpact employers. Failing to comply with these tasks triggers bigfines. For example, an incorrect W-2 health care value report willresult in a $100 penalty per W-2 form with a maximum penalty of$1.5 million per year. 

In these times where productivity is key, partnering with a TPAto handle tasks that aren't in the employer's core business is asmart move. TPAs excel in handling these tasks given their depthand breadth of knowledge and they offer a virtuoso performance.

Anne Lennan is president of the Society of ProfessionalBenefit Administrators, the national association of TPA firms whoprovide comprehensive ongoing administrative services to clientemployee benefit plans.