Most noteworthy, the Departments state that if an employer has an arrangement with its employees whereby the employer reimburses employees for the cost of an individual health insurance policy, that arrangement constitutes a "group health plan" for purposes of ERISA and the Code. As a group health plan, the arrangement would not comply with the market reforms under the ACA thereby triggering penalties and excise taxes. According to the Departments, the arrangement is a group health plan. This would mean that the arrangement is also subject to all of the applicable requirements of ERISA (e.g., the need to have a written instrument, the need to file annual returns, etc.).
Employers should consult with their lawyer before eliminating any group health insurance policy. It is critical to review the reasons for eliminating any existing policies and understand what the employer intends to do to replace the group health insurance. There could be ramifications to the employer, including fines and penalties, depending on what the employer is intending to do moving forward.
You can read the FAQs issued here. Please contact Jason Mettley or any other Meyer, Unkovic & Scott LLP attorney with whom you have worked to discuss any questions you may have on the Affordable Care Act.
This material is for informational purposes only. It is not and should not be solely relied on as legal advice in dealing with any specific situation.