Update from WGA Compliance team: DOL FAQ and Effect on Opt-Out Benefits
The U.S. Department of Labor recently issued FAQs on the compliance of “premium reimbursement arrangements” including whether an employer can offer employees cash to reimburse the purchase of an individual policy. The release states that such employer reimbursement plans would be treated as a group health plan and does not comply with the market reform and employer mandate provisions of the Affordable Care Act, and as a result, could be subject to penalties.
In what appears to be an unintended consequence of these regulations, the common employer practice of offering an opt-out benefit (in the form of taxable cash) to employees who do not enroll in the company’s group health plan is now being scrutinized. Here is the nuance: When employers offer an opt-out benefit but require proof of other health insurance coverage, they may run afoul of the latest DOL guidance. Conversely, employers that offer an opt-out benefit without any restriction, such as requiring proof of other coverage, are in compliance.
In short, the most conservative approach to offering a compliant opt-out benefit is to refrain from placing any restrictions on the use of the proceeds, including asking for proof of other coverage. (Note: we do not believe that spousal surcharges are affected by this new guidance.)
WGA will continue to monitor this and provide additional details as further guidance becomes available.