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Northwest OH Legal Blog

Thursday, December 5, 2013

How will Employer Mandates under the ACA Affect Union Plans?

Many employers continue to experience frustration as they attempt to untangle the provisions of the Patient Protection and Affordable Care Act (ACA).  Within this Act, there are employer mandates that have been introduced, finalized and confusingly, now delayed.  This delay gives multiemployer plan sponsors more time to understand how employers will be forced to meet the employer mandates and how multiemployer health and welfare plans could be affected.  These employer mandates do include union employees and union-sponsored health care plans are often more highly scrutinized for their adherence to ACA mandates. 

Under the Affordable Care Act, employers  that have an average of at least 50 full-time and 50 full-time equivalent employees  during the preceding calendar year are subject to penalties, characterized as “shared-responsibility payments,” if either of the following scenarios occur:  

1.  If the employer does not offer coverage to at least 95% of full-time employees, a nondeductible assessable payment of $166.67 per month ($2,000 annually) would be multiplied by the number of full-time employees, in excess of the first 30, that work an average of 30 or more hours per week. Collectively bargained employees count in calculating the 95% threshold test, whether the employees' health plan is sponsored by the union or the employer.

2.  If the plan offered to employees does not provide "minimum value" as defined by the Department of Labor or is not affordable, the employer could be subject to a penalty equal to $250 per month ($3,000 annually) times the number of full-time employees who purchase insurance through one of the state or federal exchanges and receive a subsidy (a premium tax credit or cost-sharing reduction).

So how do these regulations specifically apply if employees are in a health plan maintained by a union?  Four conditions must be met to comply with the 95% test: 

1.  The employer must make a contribution to the union plan. Most collective bargaining agreements (CBAs) specify that employers must help fund their employees’ union-provided benefits.

2.  Employees must have an opportunity to enroll in the plan.  This is not a problem that most union plans face because union members are frequently enrolled from the first hour worked under their CBA.  This rule will be even broader after 2014, because employers will be forced to offer coverage to dependents up to age 26, regardless of their marital or employment status.

3.  A health and welfare plan must satisfy the “minimum value” requirement, which means the plan's share of the total allowed costs of benefits must be at least 60%.  Most union health plans already absorb at least 60% of the benefits costs and often pay an even larger share. 

4.  The plan must be “affordable” for the employee. This test is passed if an employee's required contribution toward the lowest-cost self-only option is not greater than 9.5% of his/her wages.

If all four of these conditions are met, a union employer may categorize union employees among workers offered minimum essential coverage under the union benefits plan. Many employers and benefit plan sponsors found this employer mandate under the Affordable Care Act to be cumbersome and restrictive.  This may be why the Department of Labor delayed this employer mandate by one year with Notice 2013-45, pushing the effective date of employer penalties to 2015.   While this delay may seem unsettling, it also gives employers and plan sponsors time to take a deep breath and consider the following:

1.  Union employees are included in Affordable Care Act’s employer mandate requirements;

2.  Multiemployer plans must offer coverage to dependents up to age 26 including step children, foster children or legally adopted children. 

3.  Multiemployer plans should be analyzed to be sure that enrollment provisions and procedures meet the requirements for giving employees an effective opportunity to enroll, including times to enroll and proper notice of availability of coverage and benefits options.


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