Excepted benefits aren’t subject to the Affordable Care Act (ACA) health care reform law. Proposed regulations would modify limited-scope dental and vision excepted benefits, create new wraparound coverage to group plans that would be considered excepted benefits and clarify Employee Assistance Plans (EAPs).
The intent is to allow employees who buy individual policies through an exchange, and who qualify for premium tax credits, to receive employer-provided excepted benefits without jeopardizing their eligibility for those credits. The IRS warns, however, that employers that offer only excepted benefits can’t wiggle off the ACA’s free-rider penalty hook.
The regs are proposed to become effective for the 2015 plan year, but you may rely on the dental/vision plan and EAP portions of the regs through at least 2014. (78 F.R. 77632, 12-24-13)
Dental and vision benefits. To be considered excepted benefits, limited-scope dental and vision benefits must be provided under a separate policy or must not be an integral part of a group plan. Key: Benefits aren’t integral if employees can turn down the coverage and those who accept coverage must pay an additional amount. To level the playing field between insured and self-insured plans, the regs propose to eliminate the requirement that employees be charged an additional premium or contribution for these benefits.
Employee assistance plans. EAPs are popular, but there’s no definition of what constitutes an EAP. Under the regs, EAPs that meet these requirements would be considered excepted benefits:
- They don’t offer significant benefits in the nature of medical care. Warning: Final regs will quantify how significant benefits must be before they’re considered medical care.
- Benefits aren’t coordinated with benefits under another group plan (i.e., EAPs aren’t gatekeepers, preventing employees from accessing other group benefits until EAP benefits are exhausted).
- Employees aren’t charged premiums, contributions or cost sharing.
Wraparound coverage. The regs would allow you to offer wraparound coverage to employees who buy coverage on an individual exchange, so their overall benefits would be comparable to the group coverage they couldn’t afford. This way, you could maintain a comparable level of benefits for all employees. Wraparound benefits would be considered excepted benefits if these criteria are met:
- The wraparound coverage provides additional coverage to employees enrolled in non-grandfathered individual coverage and for whom group coverage is unaffordable, and the wraparound coverage doesn’t replace group coverage for employers that drop coverage or that don’t offer group plans that provide minimum value.
- Plan sponsors couldn’t structure the wraparound coverage so that low-income employees receive fewer primary benefits than high-income employees.
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