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Final Minimum Value Regulations

On December 18, 2015, the Internal Revenue Service (IRS) released final regulations for determining whether employer sponsored plans provide minimum value.  This applies to plans that must comply with the employer mandate. These final regulations adopted clarifications to align with prior guidance.

 

When are these regulations effective?
The guidance was effective as of December 18, 2015, but applies to taxable plan years ending after December 31, 2013. Since these final regulations align with prior guidance, plans that were already subject to the employer mandate should not have much, if anything, to worry about.  It is strongly recommended that plan sponsors familiarize themselves with the clarifications listed below.

 

What if there are changes that are needed by plans to align with the final regulations? 
If there are changes that need to be made to plans based on the clarifications, these should be made as soon as possible as the regulations do not offer a specific date for compliance other than December 31, 2013.

 

What clarifications do these final regulations contain?
The following clarifications were outlined in the final regulations:

  • Active employees who are offered continuation coverage may be eligible for a premium tax credit if the coverage is not affordable and does not provide minimum value.
  • The following chart summarizes the clarifications that were made related to how affordability and minimum value are determined: 
Factors that Impact Affordability and Minimum Value DeterminationClarification in Final Regulations
Definition of Modified Adjusted Gross Income Household income includes a child’s gross income only if the child’s income is included on the income tax return of the parents(s).
Wellness Program Incentives Wellness incentives unrelated to tobacco use are treated as unearned when determining affordability, while incentives related to tobacco use are treated as earned in determining affordability.
Health Reimbursement Accounts (HRA)
  • Amounts made available under an HRA reduce an employee’s required contribution for coverage if the HRA would have been integrated with eligible employer sponsored coverage had the employee enrolled in the plan. In that case, the HRA amounts will count toward providing minimum value.
  • An HRA is taken into account in determining affordability and minimum value only if the HRA and eligible employer sponsored coverage are offered by the same employer.
  • HRA contributions are taken into account for affordability only (and not minimum value)  if the employee can use the HRA contributions to pay for:

                  1. plan premiums only or

                  2. cost sharing or

                  3. benefits not covered by the plan in addition to premiums

 

  • Employer contributions to an HRA reduce an employee’s required contribution only if the amount is determinable within a reasonable time before the employee must decide whether to enroll.
Employee’s Required Contribution under a Cafeteria Plan

An employee’s required contribution is reduced by the employer contributions under a cafeteria plan if the employer contribution:

 

           1. may not be taken as a taxable benefit,

           2. may be used to pay for minimal essential coverage, and 

           3. may be used only to pay for medical care

 

If you have any questions, please contact your client solutions team.

 

Compliance Corner is being provided as an informational tool. It is recommended that plans consult with their own experts or counsel to review all applicable federal and state legal requirements that may apply to their group health plan. By providing this publication and any attachments, Meritain Health is not exercising discretionary authority over the plan and is not assuming a plan fiduciary role, nor is Meritain Health providing legal advice.