ACA’s Automatic Enrollment Requirement Repealed

On Nov. 2, 2015, President Obama signed the Bipartisan Budget Act of 2015 into law, which included a provision repealing the ACA requirement that large companies automatically enroll their employees in group health plans.

Under the ACA, certain large employers that offer health coverage would have been required to automatically enroll new employees (and re-enroll current employees) in one of the employer’s health plans, subject to any permissible waiting period.  This automatic enrollment requirement would have applied to employers subject to the Fair Labor Standards Act (FLSA) with more than 200 full-time employees.

Although the ACA’s automatic enrollment requirement has now been repealed, the Internal Revenue Service (IRS) has previously issued guidance in Internal Revenue Bulletin 2002-20 and in a proposed rule from 2007 that employers can choose to use an automatic enrollment process under certain circumstances. This would allow an employer to enroll an eligible employee in the employer’s plan, unless the employee affirmatively elects otherwise. This process often involves a deduction from the employee’s wages that is contributed to the plan on the employee’s behalf.

In general, any employer using an automatic enrollment arrangement would need to provide adequate notice to employees and an opportunity for employees to opt out of the coverage. Employers should also be aware of any applicable wage withholding laws in their state, which may require an affirmative election from employees before any deductions can be made. Because of these issues, employers may want to consult with legal counsel before implementing any automatic enrollment arrangement.

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The information provided is for informational purposes only and does not constitute legal advice. The information above contains only a summary of the applicable legal provisions and does not purport to cover every aspect of any particular law, regulation or requirement. Depending on the specific facts of any situation, there may be additional or different requirements. This is to be used only as a guide and not as a definitive description of your compliance obligations.