Budget deal primes repeal of ACA automatic enrollment requirement
Click on the image to read a tucked-away Affordable Care Act concession in the October 26, 2015 agreement that the White House reached with congressional leaders over budget reconciliation.
October 27, 2015 – A much-contested provision in the employer mandate of the Affordable Care Act appears close to repeal after the budget agreement that the Obama administration reached with congressional leaders just before midnight.
It is the provision that requires employers with over 200 full-time employees to automatically enroll employees in coverage within their first 90 days (to be precise, before the first day after the first full three months of employment).
The undoing of ACA automatic enrollment provision – should Congress pass the two-year budget deal that raises the federal borrowing limit and infuses $80 billion into defense and domestic spending – is a concession listed as Section 604.
Titled “Repeal of Automatic Enrollment Requirement,” this concession would eliminate the ACA regulation amending the Fair Labor Standards Act of 1938, which says that “an employer to which this Act applies that has more than 200 full-time employees and that offers employees enrollment in 1 or more health benefits plans shall automatically enroll new full-time employees in one of the plans offered (subject to any waiting period authorized by law) and to continue the enrollment of current employees in a health benefits plan offered through the employer.”
A vote on the budget agreement is expected by the House as early as Wednesday and by the Senate on Thursday. The raising of the borrowing limit agreed upon in this budget reconciliation would avert a credit default predicted for November 3, 2015. The delicately balanced package is expected to pass both houses of Congress with bipartisan support.
Though the IRS has not yet announced a start date for compliance with the automatic enrollment requirement, its looming implementation caused particular concern not only among employers we talk to but also with legal scholars on both sides.
Central to the issue with this provision has been that if you have to “automatically” enroll someone in coverage, you would “automatically” set up a deduction for the employee’s share of their self-only coverage. The problem then is that there are interpretations of other Department of Labor acts that limit what an employer can deduct from an employee’s paycheck without prior approval. In the wake of other legal challenges to the new health law, it’s not been likely that the IRS would open a matter of this gravity.
We have been advising our clients that guidance on automatic enrollment would be coming from the IRS. A best practice that we have been recommending is to maintain waivers within our ACA compliance solution so that employee coverage status is recorded in one system. If a company chooses tighter control over individual offers of coverage and declinations of coverage, they need to document an offer of coverage and electively use our waiver management tool.
Should these proactive compliance measures become moot points with repeal of the ACA automatic enrollment requirement, it’s important to remember that employers affected by the Affordable Care Act still will have to comply with all other aspects of the law – from the coverage mandate to the IRS reporting regulations.