ACA coverage and the multiemployer plan problem

As we move in to the first phase of ACA compliance, a number of employers have been asking me about unionized employees and how they can know whether the employees are “offered” coverage (as required to avoid penalties) when coverage is provided through a multiemployer plan to which the employer contributes. The concern is that since the ACA requires an employer to offer coverage, and because the multiemployer plan is not technically their own plan, are they really offering coverage so as to avoid the penalties?

Fortunately, this issue has been addressed in the final regulations implementing the employer play-or-pay penalty. 

It may have been overlooked, but in the preamble to those regulations, there is interim relief that provides that for employers that are required to make contributions to multiemployer plans under their collective bargaining agreements, if the multiemployer plan offers coverage that is affordable and provides minimum value and is offered to the children of individuals who are otherwise eligible, the employer will not be penalized, regardless of whether the employer’s employee is in fact eligible for the coverage under the multiemployer plan.

More importantly, it also provides that coverage offered by a multiemployer plan to which the employer contributes that is affordable and provides minimum value is considered coverage offered “on behalf of” the employer. So the obligation to offer coverage is satisfied by virtue of the fact that there is an obligation to contribute to the plan and the plan controls the eligibility.

As an additional protection, the interim guidance now provides that an employer is treated as offering coverage for all employees for whom it is required to contribute to the multiemployer plan, even those full-time employees who never satisfy that plan’s eligibility rules and therefore are never offered coverage. So employers who are making contributions to the plan (who arguably never have control over the plan’s eligibility rules) are protected as long as they are making contributions. The fact that the plan may not actually provide coverage does not mean the employer has failed to offer the coverage.

This rule was originally transitional and only applied in 2014, but it has been extended until otherwise modified. So there would be no penalty as long as the employer is obligated by the collective bargaining agreement to make contributions to a plan that:

Offers dependent coverage;

Provides minimum value coverage; and

Is affordable.  

How does an employer know that a plan does these things? One thing an employer could do is ask specifically for confirmation from the plan or the union that the plan satisfies these conditions. Even with the interim guidance, there is still an obligation for the employer to make sure these conditions are met.

So if you are an employer contributing to a multiemployer plan, get confirmation that the plan meets these three conditions. As long as your collective bargaining agreement requires you to make contributions on behalf of full-time employees, you should be safe because you are “offering coverage.”

Source: Employee Benefit Adviser