IRS Guidance Causes Confusion About ACA Requirements

Once again, the world of employer-provided benefits is swirling with confusion because of an additional guidance the Internal Revenue Service released on Feb. 18.

First and foremost, know that if you are a ClaimLinx member, your plan meets the ACA requirements. ClaimLinx is constantly partnered with tax attorneys to be absolutely certain we understand any new information so that if adjustments need to be made to your company plan, we can do so immediately.

What this notice is all about:

IRS Notice 2015-17 concerns employer payment plans and their compliance with the Affordable Care Act’s requirements for group health plans.

In this case, employer payment plans refers to those group health plans in which employers set an annual limit for health insurance premium and reimburse employees for an individual health insurance plan, until he or she reaches that limit.

This was a common practice in the past, for those companies that could not afford to provide a traditional group health plan purchased from an insurance company. However, the ACA now requires that all group plans have no annual or lifetime benefit limits. Therefore, this strategy for a group plan does not meet the requirements of the ACA market reforms and would involve the employer paying a tax penalty, under Internal Revenue Code § 4980D.

Why this can be misleading about your plan:

Unfortunately, the IRS guidance does not specifically make distinctions about the type of employer payment plans it is referring to, so many employers with non-traditional benefits strategies, like clients of ClaimLinx, have been concerned by its general release.

The ClaimLinx strategy for purchasing benefits does not include setting a specific annual limit on health care premium. Instead, the employer purchases an individual plan for the employee, sets an employee contribution level and supplements any remaining benefits through the secondary Medical Expense Reimbursement Plan.

How your group plan meets ACA requirements:

A group health plan’s level of compliance with ACA requirements refers to its fulfillment of certain new market reforms. The law now requires that all plans include the following provisions:

— There are no annual or lifetime benefit limits

— No one is denied coverage because of a preexisting condition

— The ten essential benefits are covered

Meeting these requirements can be done in a number of ways, including purchasing a traditional group plan through an insurance carrier, purchasing individual plans on the marketplace, purchasing individual plans through an insurance carrier or even completely self-funding the benefits.

As a ClaimLinx client, you know we have found the most cost-effective way of providing group benefits is to purchase high-deductible individual plans or one high-deductible group plan and then add any extra benefits through a Medical Expense Reimbursement Plan.

It is clear, in studying the actual requirements within the Affordable Care Act, that this strategy for purchasing benefits complies with the market reforms and would not incur tax penalties from the IRS.

Additionally, the IRS specifically acknowledges in Notice 2013-54, referenced in the most recent guidance, that employer payment plans do qualify as group health plans, as long as they fulfill the market reforms.

“A group health plan, such as an employer payment plan, that reimburses an employee’s substantiated individual insurance policy premiums must satisfy the market reforms for group health plans.”

Therefore, as long as your group plan continues to follow the market reforms, there can be no problems or challenges to your compliance with the law.

How to decipher guidance in the future:

As the ACA continues to change and evolve, we can guarantee there will be more misleading guidance that will be released from the IRS, Department of Labor, Department of Treasury and other government bodies.

When guidance is released, it is important to remember it is sent to the general public indiscriminately, whether it applies to how you purchase your benefits or not. It can be especially frightening for businesses that do not have traditional group plans purchased directly from insurance companies, but this does not automatically mean that your plan is not meeting ACA requirements.

It’s also important to note guidance and notices released from these government organizations are interpretations and/or applications and are not directly associated with the law itself. As the IRS states, “in its role in administering the tax laws enacted by the Congress, the IRS must take the specifics of these laws and translate them.” For this reason, it is important to always reference the actual law, rather than exclusively depending on guidance and FAQs.

If you have more questions regarding your company’s compliance with the ACA requirements, please email service@claimlinx.com.

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