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CCH® BENEFITS — 05/18/10

Health Reform 2010, Automatic Enrollment For Employees Of Large Employers

from Spencer’s Benefits Reports: For the next few weeks, Spencer’s Benefits Reports will highlight specific provisions in the new health reform law which affect employer-sponsored plans.

Sec. 1511 of the Affordable Care Act concerns the automatic enrollment for employees of large employers.

Employers with more than 200 full-time employees who offer enrollment in one or more health benefits plans are required to automatically enroll new employees in one of the plans offered.

John Garner, a principal with Garner Consulting of Pasadena, Cal., and author of the Health Insurance Answer Book, notes that the automatic enrollment requirement for large employers (more than 200 employees) will undoubtedly increase enrollment in employer-sponsored plans, much as automatic enrollment has done for 401(k) plans that have elected it. Even so, the Congressional Budget Office estimates that overall enrollment in employer-sponsored plans will decline by about 3 million people. This is because the impact of the individual mandate and the automatic enrollment provision will be more than offset by small employers dropping coverage and lower income employees opting for coverage in exchanges where they can receive tax credits.

The Affordable Care Act specifies that new full-time employees will automatically be enrolled in one of the plans (subject to any waiting period authorized by law), and current employees will continue to be enrolled. The automatic enrollment program must include adequate notice and the opportunity for an employee to opt out of any coverage the individual or employee was automatically enrolled in. This federal law does not supersede any state law which establishes, implements, or continues in effect any standard or requirement relating to employers in connection with payroll unless the state law would prevent an employer from instituting the automatic enrollment program.

Notice. Employers are required to provide an employee, at the time of hiring (or, with respect to current employees, not later than March 1, 2013), written notice—

(1) informing the employee of the existence of an Exchange, including a description of the services provided by such Exchange, and the manner in which the employee may contact the Exchange to request assistance;
(2) if the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60%, that the employee may be eligible for a premium tax credit and a cost sharing reduction under the Affordable Care Act, if the employee purchases a qualified health plan through the Exchange; and
(3) if the employee purchases a qualified health plan through the Exchange and the employer does not offer a free choice voucher, that the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for federal income tax purposes.

Because of the new requirement that applies to employers that pay less than 60% of the premium to provide expanded notices to employees, 60% may become the new norm, notes Mr. Garner. If an employer has been paying 80% of the employee premium and 50% of the family premium, they may switch to 60% of both in order to avoid providing more than the minimum notice.

Regulations. The Secretary of Labor must issue regulations for both the automatic enrollment provision and the notice provision.

Effective date. No The provision is considered effective on March 23, 2010. The notice provision will take effect for employers beginning on March 1, 2013.

CCH Law, Explanation And Analysis Of Health Reform Act Available

CCH’s Law, Explanation And Analysis of the Patient Protection and Affordable Care Act of 2010 provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation. Included in the online version is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. A hard-copy version of the book is available for $149.

Spencer’s Benefits Reports subscribers have access to the Law, Explanation And Analysis with their Internet subscription:

(1) To access the legislation on IntelliConnect, visit “News” under the browse tree menu “Health Care Compliance and Reimbursement.”

(2) To access the legislation on the Internet Research Network, click on “Patient Protection and Affordable Care Act: Law, Explanation, and Analysis” on the “Health Care Reimbursement” tab, under the “Medicare and Medicaid Guide” blue bar.

For more information or to order the hard-copy version of the book, please call (800) 248-3248 or click http://hr.cch.com/Products/ProductID-7127.asp. Discounts are available for multiple copies.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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