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Regulation and Compliance > Federal Regulation

IRS posts final PPACA affordability regulations

By Allison Bell

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The Internal Revenue Services (IRS) is getting ready to publish a collection of final Patient Protection and Affordable Care Act (PPACA) regulations that could affect how employers structure health reimbursement arrangement (HRA) contributions, cafeteria plan contributions and wellness programs.

Other sections of the new regulation package, Minimum Value of Eligible Employer-Sponsored Plans and Other Rules Regarding the Health Insurance Premium Tax Credit (RIN 1545-BL43), deal with matters such as how families should count their children’s income when trying to qualify for PPACA premium tax credit subsidies, and how the premium tax credit program should treat babies born in the middle of a month.

The IRS is preparing to publish the package in the Federal Register Friday.

The regulations in the package are based on draft regulations the IRS posted in May 2013.

See also: IRS drafts large-group minimum value rules

The packet appears to be a companion to a collection of informal PPACA guidance, presented in the form of answers to taxpayer questions, that the IRS released Wednesday.

PPACA calls for large employers that fail to provide affordable health coverage with a minimum value to face the possibility of having to pay penalties. 

The HRA, cafeteria plan and wellness program regulations in the new final rules package deal with how specific benefits arrangements affect the official coverage affordability or minimum value calculations.

In the HRA section, for example, officials talk about an HRA combined with an employer-sponsored group health plan. If an employer promises to contribute a certain amount of cash to the HRA, the new contributions count toward affordability calculations. The contributions would help the benefits package meet minimum value standards if the employee has to use the cash to pay amounts related to the primary plan, but not if the employee can use the cash to  pay for other benefits.

If the employer simply offers to try to make an HRA contribution, and an employee does not know before signing up for coverage whether the employer will really make the contribution, the contribution would not help the employer meet the PPACA affordability or minimum value requirements, officials say.

In a section about employer contributions to Internal Revenue Code (IRC) Section 125 cafeteria plans, officials say employer flex contributions count in affordability calculations if the employee cannot take the contribution as a taxable benefit; can use the money to pay for minimum essential coverage; and can use the cash only to pay for the kinds of medical care that flexible spending arrangement (FSA) money can pay for.

See also: PPACA Form 1095-B: CMS to put off full Medicare compliance

In the wellness program section, officials say an employer can use tobacco cessation incentives without worrying about their effects on affordability. An employer has to assume an enrollee will be unable to qualify for any other wellness programs incentives when making affordability calculations.

A section that deals with the definition of modified adjusted gross income (MAGI) may be of interest to advisors who help clients with individual health insurance. IRS officials say parents can elect to include their children’s gross income, tax-exempt interest earnings and nontaxable Social Security income in the MAGI total. 

In a section on individual and family premium tax credits, officials state that, for babies born in the middle of the month, the plan must provide coverage from the date of birth. The tax credit program will treat the baby as having been born on the first day of the month in which the baby was born, but the plan does not have to enroll the baby as of the first day of the month. The same rules apply to people who get coverage in the middle of month because of adoptions, foster care placements, or placements resulting from the effective date of a court order.

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