Employers considering offering individual policy options instead of an employer-sponsored plan to employees may be subject to penalties for non-compliance with the Affordable Care Act’s (ACA) market reforms, according to recently issued guidance.

While it was widely believed penalties would apply only to pre-tax arrangements, the guidance clarifies that after-tax reimbursements and cash compensation for individual premiums also do not comply.

The Departments of Labor, Health and Human Services, and the Treasury clarified that these arrangements do not comply and may trigger an excise tax of $100 per day for each applicable employee ($36,500 per year per employee) under Internal Revenue Service Code Section 4980D.

High Claims Risk
The FAQs clarify that an employer cannot offer a choice between enrollment in the standard group health plan or cash only to employees with a high claims risk.

Code Section 105 Reimbursement Plans
The FAQs assert that certain vendors are marketing products to employers claiming that they can establish a Code Section 105 reimbursement plan instead of providing a group health insurance plan.

For expanded information on this topic, please visit www.dol.gov.