The Affordable Care Act requirement that large employers automatically enroll in a group health plan any employees that don’t respond when asked to choose a plan, has been repealed
The change came after the employer community had lobbied to have the provision repealed because of the lack of clarity in the law, particularly about how much discretion employers would have in choosing a plan for those workers.
Originally the ACA amended the Fair Labor Standards Act by adding a new section requiring employers with more than 200 full-time employees to automatically enroll new full-time employees in the employer’s health benefits plans and continue enrollment of current employees.
The enforcement of this section was pending regulations by the Department of Labor (DOL).
But, in November 2015, President Obama signed the Bipartisan Budget Act of 2015, which in small part repealed the auto-enrollment requirement.
The repeal does not bar employers from auto-enrollment. They may choose to voluntarily continue with automatic enrollment options, such as default or negative elections, but there is no obligation to do so.
Employers may still decide to use “default” or “negative” elections for enrolling employees into health plan coverage or certain other benefits. Under a default or negative enrollment arrangement, an otherwise eligible employee will be deemed to have elected a certain type and level of coverage, unless they timely return a written waiver of that coverage.
The Internal Revenue Service issued regulations in 2007 approving this approach. In fact, this same approach can also be used with health savings account contributions made under a cafeteria plan.
Under Section 125 of the Revenue Code, employers that implement default or negative elections must provide notice to employees about the coverage and cost, and provide the opportunity to opt out of the arrangement.
In many cases, negative or default elections will involve payroll deductions made without an affirmative election by employees to pay for the premiums with their wages.
Some state wage-withholding laws, however, have an express requirement that there be an affirmative election by the employee before any deductions may be made. But, the DOL has taken the position that in this context such wage-withholding laws are preempted by ERISA.
That said, if you do want to still use auto-enroll, you should tread carefully as the result could create a dispute with one of your staff. Fallout could include a run-in with the state labor commissioner, or in the worst-case scenario the threat of a lawsuit.
Before you go ahead with auto-enroll, please consult us or your legal counsel.