From what I've heard, the W-2 aggregate cost of benefits party organizers are rolling out the red carpet for medical this year. When they get to the door, they’ll be escorted right in and I’ve even heard their value is non-taxable. But I think some of the organizers may have forgotten about employee assistance programs. EAP invited to the W-2 party?  Huh? Just as nobody puts baby in a corner (forgive the shameless reference to Dirty Dancing), nobody puts EAP in a corner!

First, take a look at question #32 in IRS Notice 2012-9 issued in January 2012 - http://www.irs.gov/irb/2012-04_IRB/ar10.html. Your initial reaction might be: “This doesn’t apply to me because I don’t offer our EAP benefit under COBRA so obviously don’t charge a premium for our EAP benefit under COBRA.”

Now read DOL Advisory Opinion 91-26A (July 9, 1991) which discusses different types of EAP plans. If this information, and your legal counsel’s understanding and interpretation, changes your mind about offering your EAP benefit through COBRA, your next reaction may be one of two things: “Okay, I need to start offering my EAP benefit through COBRA and include the dollar value as part of the aggregate cost of benefits on the W-2s” or “I don’t know the dollar value of the EAP benefit because it’s bundled with my disability, life, or other ancillary benefit.”

If the latter is the case, you may want to reach out to your EAP carrier to see if there is a standalone dollar value associated with the EAP (especially because you may now start offering it through COBRA and qualified individuals will need to know the dollar amount to pay for it). Plus, you’ll need that value for the W-2s. When I went through this exercise in my compliance role, some carriers offering the bundled EAP actually told me that the dollar value of the EAP was $0, which meant no value for the aggregate cost of benefits on the W-2s. But it did give me a new awareness about offering the benefit through COBRA. 

Check with your attorney to see if the type of EAP you provide should be offered through COBRA and if so, determine if there is a dollar amount associated with it. If there is, it’s likely that its dollar value will need to be included as part of the aggregate cost of benefits that appear on your W-2s.

Bouncer, please step aside. EAP is joining the party!

Mahalo.

Contributing Editor Ed Bray, JD, is director of Employee Benefits for Hawaiian Airlines.

Have you encountered this issue? Do you know the standalone dollar value of your EAP benefit? Share your thoughts in the comments.

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