From an email to Christina regarding her 2 clients, Syme Construction and TMC 6/11/24
Note: All employer paid health insurance plans are not a taxable benefit to employees.
For self-insured employers, the cost reported in Box 12 with code DD on the W-2 form should reflect the cost of providing health insurance coverage to each employee. This does not include the actual claims paid but rather the cost of coverage.
For Forms W-2 and W-3, the reported amount should include both the portion paid by the employer and the portion paid by the employee. For self-insured plans, the cost should be calculated based on the COBRA applicable premium, without the 2% administrative charge. This means you need to calculate a premium equivalent that represents the cost of providing coverage to employees, which should then be reported on their W-2 forms.
The COBRA applicable premium is the cost to the employer of providing health insurance to similarly situated beneficiaries, calculated without the 2% administrative fee that COBRA allows employers to charge. This amount should be determined using one of two methods:
Actuarial Basis: Using actuarial calculations to determine the cost of providing the benefits.
Past Cost Basis: Using the cost of providing coverage in the past, adjusted for current costs.
The premium equivalent should represent the cost of providing coverage to the employees and should not reflect actual claims paid. This ensures a consistent and reasonable allocation of health insurance costs.
COBRA coverage: When an employer has a self-insured health plan, they typically contract with a third-party administrator (TPA) to handle various administrative tasks, including COBRA administration. The TPA manages the COBRA notification process, collects premiums, and administers coverage for eligible individuals.
Here are a few third-party administrator (TPA) companies that provide services in Montana:
Allegiance Benefit Plan Management
EBMS (Employee Benefit Management Services)
Montana Health Network
ClaimLinx
Benefit & Financial Strategies
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