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The Affordable Care Act – Miscellaneous Provisions Applicable to Large Employers under the Act (Part 6 of 8), by Barbara Halpin
Welcome to part 6 of the Affordable Care Act Series! Today I’ll be discussing several of the additional provisions that applicable large employers should be aware of. They're in no particular order.
1. Offer of Coverage
If an applicable large employer fails to offer coverage to a full-time employee for any day of a calendar month during which the employee was employed by the employer, the employee is treated as not being offered coverage during that entire month. The regulations do not provide guidance to employers for demonstrating that an offer of coverage was made to an employee so recordkeeping should be up to date.
If an employee has not been offered an effective opportunity to accept coverage, the employee will not be treated as having been offered coverage. In addition, the employee must have an effective opportunity to decline an offer of coverage that is not minimum value coverage or that is not affordable – an employer cannot make an employee ineligible for a premium tax credit by providing the employee with mandatory coverage (coverage which the employee has not had an opportunity to decline) that does not meet minimum value.
2. Offer of Coverage in the Case of Nonpayment or Late Payment Premiums
If an employee’s insurance payment is billed, rather than withheld (which may occur in the case of tipped employees) and the payment is late or not made, the employer is not required to provide coverage for the period for which the premium is not timely made. The employer is treated as having offered that employee coverage for the remainder of the coverage period (typically the remainder of the plan year).
3. Failure to Offer Coverage to a Limited Number of Full-Time Employees Due to Error - What Happens?
A penalty will not be applied to an employer that intends to offer coverage to all of its full-time employees, but fails to offer coverage to a few full-time employees as long as the employer’s offer reaches at least 95% of employees being covered. An “applicable large employer” will be treated as offering coverage to its full-time employees and their (non-spousal) dependents for a calendar month if, for that month, it offers coverage to all but the greater of 5% or 5 of its full-time employees. The alternative margin of 5 full-time employees, and their dependents, (if greater than 5% of full-time employees) is designed to accommodate smaller covered employers that may not offer coverage to a few full-time employees.
4. Turn Full-Time Positions into Part-Time Positions? Potential ERISA Penalties/Liability for Interference with Plan Benefits
Some employers may be tempted to avoid coverage under the ACA by eliminating full-time positions and transferring the duties of those positions to newly created part-time positions offered to the prior full-time employees. It should be noted, however, that Section 510 of ERISA, 29 U.S.C. § 1140, makes it unlawful for any person to “interfere with the attainment of any right to which such participant may become entitled under the plan,” or to “discriminate against a plan participant or beneficiary, for exercising rights provided by an employee benefit plan.”
It is possible that employees who lose coverage based on job restructuring designed to affect coverage under the ACA could assert claims under ERISA Sec 510.
5. Assessment and Payment of Liability
Although there isn’t much guidance yet on how the assessments will be billed, they will be payable upon notice and demand. Regulations will be forthcoming to explain how employers will receive notice that one or more employees received a premium tax credit or cost-sharing reduction and are provided with the opportunity to respond before notice and demand for payment. According to the current information from the IRS, employers will not be required to make the employer shared responsibility payment on their tax return.
6. Transition Rules – Relief from Penalty for Employers with Fiscal Year Plan Years
If an applicable large employer maintained a fiscal year plan as of December 27, 2012, relief applies with respect to employees of the employer who would be eligible for coverage as of the first day of the first fiscal year of that plan that begins in 2014. If the employee is offered affordable, minimum value coverage no later than the first day of the 2014 plan year, no penalty will be due for that employee for the period prior to the first day of the 2014 plan year.
7. Coverage for Dependents
Health care plans now require “dependent” coverage however, spouses are excluded from the definition of “dependents.” Any employer that takes steps during the plan years that begin in 2014 toward satisfying this provision relating to offering of coverage to full-time employees’ dependents will not be liable for any penalties solely on account of a failure to offer coverage to the dependents for that plan year.
8. Automatic Enrollment for Larger Employers
Section 18A of the FLSA (added by section 1511 of the Act) requires employers that have more than 200 full-time employees and to which the FLSA applies to automatically enroll new full-time employees in one of the employer’s health benefit plans (subject to any waiting period authorized by law) and continue to enroll current employees in a health benefits plan offered through the employer. 18A also requires adequate notice and the opportunity for an employee to opt out of any coverage in which the employee was automatically enrolled.
These are simply some of the additional provisions of which employers should be aware. The next blog entry will discuss the Act's effect on small business.