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IRS blocks employer health plan threat strategy

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To get credit for offering “minimum essential coverage,” employers must offer the coverage in such a way that workers can really sign up for the coverage.

Otherwise, workers can say they have no access to MEC and apply for Affordable Care Act exchange plan premium tax credit subsidies, according to officials at the Internal Revenue Service.                

In some cases, if the workers apply for, and get, ACA exchange plan premium subsidies, the employer may have to pay large ACA “employer shared responsibility” penalties, even though the employer appears to offer some kind of theoretical access to health coverage.

Related: ACA coverage cops are calling your group clients

Officials at the IRS give that interpretation of the ACA premium tax credit program rules in a new answer to a question about the program.

The ACA strongly encourages employers with 50 or more full-time equivalent employees to provide MEC (which is usually pronounced “meck”). MEC is supposed to be “affordable coverage with a minimum value,” or solid, affordable major medical coverage. 

In one question in the new IRS guidance, someone asks the IRS about an employer, X, that offers “affordable, minimum-value coverage” but has stated that it will “terminate the employee’s employment” if the employee tries to sign up for the coverage.

Because Employer X says it will fire the employee if the employee signs up for the MEC plan, the “employee cannot enroll in X’s coverage and is not considered eligible for X’s employer-sponsored coverage,” IRS officials say.

In a second, related question, someone asks the IRS about an employer, Y, that will let an employee sign up for the employer’s MEC plan but threatens to fire the employee if the employee’s spouse tries to enroll. 

In that situation, the spouse is not really eligible for Employer Y’s group plan, and the spouse can apply for an ACA exchange plan premium tax credit, officials say.

Employer Y would not have to worry about the effect of the spouse qualifying for ACA premium tax credits on its shared responsibility penalty calculations, because the ACA does not penalize an employer for failure to offer coverage to an employee’s dependents. 


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