Category: Legislative Updates

The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) generally requires parity between a group health plan’s medical/surgical (M/S) benefits and mental health/substance use disorder (MH/SUD) benefits. Plan sponsors should continue to ensure that they comply with MHPAEA and monitor any participant complaints and litigation regarding access to MH/SUD coverage under their group health plans. This update addresses a recently announced non-enforcement policy from the U.S. Departments of the Treasury, Labor, and Health and Human Services related to final MHPAEA regulations released in 2024.

As outlined below, the Departments made clear that MHPAEA’s requirement to have a written NQTL comparative analysis remains a requirement under the MHPAEA, and the non-enforcement policy on the 2024 regulations does not change that compliance obligation. Here are key headlines, including the welcome temporary non-enforcement policy from regulators.

• MHPAEA Requirements Generally – MHPAEA’s parity requirements apply to financial requirements (such as deductibles, copayments and coinsurance), quantitative treatment limitations or QTLs (such as day or visit limits), and non-quantitative treatment limits or NQTLs which generally limit the scope or duration of benefits (such as prior authorization requirements, step therapy requirements and standards for provider admission to participate in a network). These protections are intended to ensure that participants and other enrollees seeking MH/SUD benefits do not face greater limitations on access to those benefits than are imposed on M/S benefits.
• Comparative Analysis Required –  Since 2021, the Consolidated Appropriations Act of 2021 (CAA) has expressly required plans that provide both M/S benefits and MH/SUD benefits and that impose NQTL on MH/SUD benefits to perform and document comparative analyses of the design and application of NQTLs and make their analyses available to the Departments as applicable, or to an applicable State authority upon request. The CAA amendments also require the Departments to report to Congress annually on the results of NQTL comparative analyses reviews conducted by the Departments. See most recent Report to Congress here.
• MHPAEA Enforcement Top Priority – Health plan sponsors should be aware of the MHPAEA compliance requirements since enforcement related to MHPAEA has been a top priority for the federal agencies and the U.S. Department of Labor (DOL) is specifically focused on group health plans for adherence to these complex requirements. See the federal agency MHPAEA webpage for background on the law and enforcement efforts.
• 2024 Final Rules Issued – Late in 2024, the Departments finalized a set of rules (the 2024 Rules) that largely focused on requirements related to NQTLs. See our prior Update for background on the 2024 Rules which impose new requirements related to NQTLs and required group health plans to take many new significant steps to comply with the MHPAEA, including to:
  • Provide “meaningful” coverage for each MH/SUD condition in each classification for which a group health plan provides M/S benefits.
  • Collect and evaluate data that may indicate disparate participant access or use between M/S benefits and MH/SUD benefits and take reasonable action steps to address any differences.
  • Certify that they have engaged in a prudent process in preparing and evaluating their plan’s comparative analyses of its NQTLs.

Most of the 2024 Rules were effective for plan years beginning on January 1, 2025, while other parts, such as the new meaningful benefits standard and the data evaluation requirements, have a delayed effective date of the first plan year beginning on or after January 1, 2026.

Welcomed Non-Enforcement Policy for 2024 Rules

In response to a legal challenge to the 2024 Rules and a federal court’s decision to grant a pause, the Departments announced that they will not enforce the 2024 Rules or otherwise pursue enforcement actions, based on a failure to comply that occurs prior to a final decision in the litigation, plus an additional 18 months. The Departments’ motion is generally in line with the Trump administration’s April 9 presidential memoranda directing the heads of all executive departments and agencies to identify certain categories of unlawful and potentially unlawful regulations. The Departments nonenforcement policy relates to the 2024 Rules for the new requirements that apply for plan years beginning on or after January 1, 2025 and January 1, 2026.

Note that employers are still required to comply with MHPAEA. The Departments made clear that MHPAEA’s requirement to have a written NQTL comparative analysis remains a requirement under the MHPAEA, and the non-enforcement policy on the 2024 Rule should not change that compliance obligation.

Next Steps

• Plan fiduciaries should continue to review compliance with MHPAEA in general, and to ensure NQTL limitations are applied no more restrictively for MH/SUD benefits than for M/S benefits in the same classification.
• The NQTL comparative analyses report is statutorily required under the MHPAEA, so plan fiduciaries should continue to prepare and update the comparative analyses report and be ready to provide it upon request by regulators and participants.
• Although a fiduciary certification is not currently being enforced, plan fiduciaries should document their actions in complying with the MHPAEA and ensure prudent processes are followed.

Group health plans and insurers have struggled to comply with the 2024 Rules and are welcoming the temporary relief provided by the non-enforcement policy. For now, plans may continue to refer to the 2013 final rule, FAQs about MH/SUD parity implementation, and other MHPAEA sub-regulatory guidance.  The Departments intend to reexamine their enforcement approach under MHPAEA and may update the guidance as part of that process.

Conner Strong & Buckelew will continue to work with our clients to analyze and understand the complex requirements of the MHPAEA and to assist with the documentation of the NQTL comparative analysis as needed. We will provide alerts and updates as new information becomes available. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

At the end of 2024, Conner Strong & Buckelew provided an Update on new Affordable Care Act (ACA) employer reporting changes signed into law. While the new rules did not significantly change existing employer reporting requirements, they did allow employers to meet Form 1095 distribution requirements for the 2024 reporting year by posting a notice of availability and then only distributing the Form upon request. We promised to provide an update on any subsequent IRS guidance on the notice requirements for the new distribution methods. The IRS has now released guidance providing further detail on how to satisfy the notice requirement and confirming that such notice must be posted by March 3, 2025, for the 2024 reporting year.

We have seen some employers not yet taking advantage of the alternative as they have already had their vendor mail the Forms for the 2024 year. However, we will likely see many more take advantage of this alternative next year. For any employer looking to provide the 1095-C by request, we can confirm IRS guidance Notice 2025-15 provides this is a viable option as long as the employer does the following:

1. A clear and conspicuous notice must be posted on a website that is reasonably accessible to all possible Form 1095 recipients.
2. For the 2024 reporting year, the notice must be posted by March 3, 2025 and remain in the same location on the website through October 15, 2025.
3. The notice must include an email address, physical address, and telephone number that can be used to request a copy of Form 1095.
4. If after posting notice of availability the employer receives a request for a Form 1095, the Form 1095 must be provided within 30 days and would have to be hand delivered or mailed.
5. Electronic distribution is permitted if employee consents (which is valid until withdrawn in writing).

Note that employers must still prepare and file Forms 1095-C with IRS each year (generally due to be filed with Form 1094-C transmittal form by March 31). And for employers subject to state-level reporting requirements in CA, MA, NJ, RI, or DC, note too that this relief for distribution of Form 1095s may not be available.

The IRS did not provide a model notice in this most recent guidance, but here is a sample to consider for posting:

MODEL / SAMPLE NOTICE

IMPORTANT HEALTH COVERAGE – TAX DOCUMENTS
Form 1095-C, titled Employer-Provided Health Insurance Offer and Coverage, is a statement of health coverage offered to eligible employees. These Forms have previously been automatically electronically distributed/mailed in prior years. According to the Internal Revenue Service (IRS), an individual does not need the information on Form 1095-C to file income taxes with the IRS. Therefore, the IRS is now allowing reporting entities to furnish 1095-C forms only upon request. Please review below for instructions on how to elect to receive the Form 1095-C.

Electing to Receive 1095-C Form Electronically
Employees should follow the below steps to consent to the electronic delivery of their 1095-C forms for the current tax year and thereafter:

1. CLICK HERE to log in to __.
2. From the home page, click on ___.
3. Select “1095-C Printing/Electronic Distribution Election” for your current and future 1095-C forms.
4. Once you have made your selection, click OK & Done.

Electing to Receive 1095-C Form by Mail
If you would like to receive your Form 1095-C for the 2024 tax year by mail, please submit your request using one of these options:
Calling this number: ______________________
Sending an email request to: ______________
Sending a regular mail request to: ___________
Include your name, a phone number and email address where you can be reached, and confirm your mailing address to request your 1095-C.

To learn more about this Form 1095-C and other Affordable Care Act (ACA) requirements, please visit IRS.gov/aca or call the IRS at (800) 829-1040.

Employers can choose to implement these changes in order to streamline some of their ACA reporting processes and reduce certain administrative burdens. Contact ACA reporting vendors regarding these reporting-related changes to determine how they will provide support with these optional reporting opportunities for the 2024 ACA reporting season. Should you have questions, contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

Group health plan (GHP) sponsors that offer prescription drug (Rx) coverage must, at least annually, notify Medicare Part D eligible individuals and the Centers for Medicare & Medicaid Services (CMS) of their plan’s creditable coverage status. Both disclosures (to Medicare Part D eligible individuals and to CMS) must meet specific form, content and timing requirements as prescribed by CMS. This update addresses the required disclosure to CMS and reminds plan sponsors that online disclosure should be completed annually no later than 60 days from the beginning of the plan year. This means that an employer with a calendar year plan that began January 1, 2025, must complete the CMS online reporting no later than March 1, 2025, and an employer with a plan year that begins July 1, 2025, must complete the reporting no later than August 29, 2025. (For more information on the Medicare Part D disclosure requirement for individuals, please see our update Medicare Part D Notices Due Before October 15th).

Medicare Part D Notice to CMS Rules

Medicare Part D rules generally require that GHPs with an Rx benefit must disclose to CMS whether the Rx coverage offered is “creditable” or “non-creditable”. Individuals who fail to enroll in Medicare Part D Rx coverage when first eligible may be subject to late enrollment penalties if they go 63 consecutive days or longer without creditable Rx coverage. Because of this potential penalty, both Medicare Part D eligible individuals and CMS need to know whether the GHP’s Rx coverage is creditable or non-creditable. Rx coverage is “creditable” when it is at least actuarially equivalent to Medicare Part D Rx coverage. “Non-creditable” Rx coverage is actuarially less in value (expected to pay out less) than the coverage offered under Medicare Part D. An Rx plan must use electronic transmission of the required annual CMS notice as the sole method for compliance with this requirement, accessing the online CMS Disclosure Form to report its “creditable” or “non-creditable” Rx status at the times noted below. Guidance and instructions are provided to assist Rx plan sponsors with completing the form.

Disclosure Timing

The CMS disclosure must be made annually and whenever any change occurs that affects whether the Rx plan’s coverage is creditable. CMS should receive a creditable coverage disclosure:

1. Within 60 days of the beginning of the plan year for which the disclosure is being reported.
2. Within 30 days of a change in creditable coverage status.
3. Within 30 days of the Rx plan’s termination.

A GHP is not required to submit the online disclosure form to CMS for any plan year where the plan does not offer Rx benefits to any Medicare Part D eligible individuals as of the beginning of the plan year. Also, plan sponsors approved for the retiree drug subsidy are exempt from filing the CMS disclosure notice with respect to those qualified covered retirees for whom the sponsor is claiming the subsidy. Note that this creditable coverage reporting is in addition to the mandatory CMS Medicare Secondary Payer (MSP) reporting typically handled by an insurer or third-party administrator for a GHP (see the CMS site on Mandatory MSP Reporting for more information).

Should you have questions about this or any aspect of GHP requirements, please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

Two new Affordable Care Act (ACA) employer reporting changes have been signed into law by the President. While the new rules do not significantly change existing employer reporting requirements, they do provide opportunities for employers to streamline some ACA reporting processes and reduce administrative burdens. The two new laws summarized below are effective for the current returns due in early 2025 for the 2024 reporting year.

Employer Reporting Improvement Act
This Act modifies ACA provisions that require employers and health insurance providers to prepare tax forms showing proof of minimum essential coverage or “MEC” (1095-B and 1095-C tax forms). Currently, employers and health insurance providers that provide MEC must report this information for each covered individual to the IRS, including the covered individual’s Tax Identification Number (TIN/social security number). Employers and providers must also send a copy of this information to the covered individual (through 1095-B and 1095-C tax forms) by January 31 of each year (extended to March 3, 2025 for the 2024 reporting year). Additionally, under current law, large employers (generally those with 50 or more full-time employees) are subject to an assessment by the IRS if they do not offer affordable MEC. Changes made to streamline these processes are as follows:

• Reporting for self-insured plans and insurers: The Act provides statutory authority for an individual’s date of birth to be substituted for the individual’s social security number (TIN/SSN) if the TIN/SSN is not available (with no need to establish reasonable cause), and for employers and providers to offer 1095-B and 1095-C tax forms to individuals electronically.
• Enforcement Timelines for Letter 226J Assessments: The Act requires the IRS to give an employer at least 90 days to respond after sending its first Letter 226J about a proposed assessment (previously the IRS generally gave 30 days to respond before the IRS takes further action.) In addition, there is now a 6-year statute of limitations on the IRS ability to impose such penalties (previously there wasn’t a formal statute of limitations).

Paperwork Burden Reduction Act
This Act modifies ACA provisions so that employers and health insurance providers are no longer required to send tax forms to covered individuals showing proof of MEC (1095-B and 1095-C tax forms) unless a form is requested. Currently, employers and health insurance providers that provide MEC must report this information for each covered individual to the IRS and provide a copy of this information to the covered individual (through 1095-B and 1095-C tax forms) by January 31 of each year (extended to March 3, 2025 for the 2024 reporting year). Changes made to streamline these processes are as follows:

• Form 1095 Distribution: The Act provides statutory authority allowing for 1095-B tax forms, which are sent by certain health insurance providers and employers, to be made available to individuals only upon request. The Act also extends this to 1095-C tax forms, which are sent by certain large employers. Employers can now choose to satisfy distribution requirements for 1095-B and 1095-C tax forms by posting a notice of availability that is “clear, conspicuous, and accessible” that the forms are available upon request. The forms must be distributed upon request of the individual by the later of January 31 (or the extended due date) or 30 days after the date of the request.
• Timely Notice Required: Employers and health insurance providers must give individuals timely notice of this option, in accordance with any requirements set by the IRS. The IRS is expected to provide further guidance regarding what is needed to satisfy the notice requirement.

State Reporting Requirements Continue
The changes addressed in this Update affect federal ACA employer reporting requirements. Employers with employees in states that have their own reporting requirements (CA, MA, NJ, RI, DC) should make note that they may not benefit from this relief for the 2024 reporting year and should stay informed on how these federal ACA reporting changes may impact applicable state/local reporting requirements.

Next Steps for Employers

1. Review ACA reporting responsibilities (see this IRS webpage for details on the employer mandate and reporting, and the pay or play penalty assessment process):

• All applicable large employers (ALEs) – those with 50 or more full-time equivalents – are required to report on offers of coverage to full-time employees. ALEs report offers of coverage information using Forms 1094-C and 1095-C.
• In addition, any size employer who provided level-funded or self-funded group health plan coverage during 2024 must report coverage information for all individuals enrolled in the plan, including employees, non-employees (e.g., retirees, COBRA participants, owners), and their spouses and dependents. ALEs generally report this information on Form 1095-C at Part III. Small employers (those with fewer than 50 full-time equivalents) report this information using Forms 1094-B and 1095-B.
• The IRS instructions for 2024 reporting indicate that Forms 1095 must be distributed to FTEs and covered individuals by March 3, 2025, and Form 1094 along with all Form 1095s must be submitted electronically to the IRS by March 31, 2025. Failure to report complete, accurate, timely information can result in significant reporting penalties.

2. Consider new streamlined/optional reporting opportunities starting with the 2024 calendar year reporting:

• As an alternative to automatically sending the 1095-C and 1095-B forms to individuals by mail or electronically, employers may now post a notice of availability to avoid this automatic distribution to individuals. The Form must be provided upon request by the later of January 31 (extended to March 3, 2025 for the 2024 reporting year) or 30 days after the request.
• Update employee communications to inform employees about the new distribution method and ensure the notice meets the IRS requirements. We expect to shortly receive IRS guidance addressing the notice requirement, but in the meantime the 2024 IRS Instructions for 1094/5-B at page 5 indicate the notice of availability for the Form 1095s should be posted on the employer’s website (or perhaps a benefits portal) with an email address, physical mailing address, and telephone number that can be used to request a copy.
• Monitor IRS guidance and stay informed on any additional information from the IRS regarding these optional reporting opportunities.

3. Contact ACA reporting vendors regarding these reporting-related changes to determine how they will support employers with these optional reporting opportunities for the 2024 ACA reporting season.

Employers can choose to implement these changes in order to streamline some of their ACA reporting processes and reduce certain administrative burdens. Your Conner Strong & Buckelew account team will work with you to stay informed and understand these new optional reporting opportunities. We will also keep our clients updated on subsequent IRS guidance on the notice requirements for the new distribution methods. Should you have questions, contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

The extension for first dollar coverage of telehealth care for plan sponsors that offer a high deductible health plan (HDHP) paired with a health savings account (HSA) did not make the final spending bill signed by President Biden on December 21, 2024. There’s hope that this measure will be brought back in 2025 by the new (119^th) Congress and made retroactive. But for now, the safe harbor is no longer available and, therefore, individuals who are covered by an HDHP with no cost sharing for telehealth services will not be eligible to contribute to an HSA for plan years beginning in 2025.

The Extensions
The first HSA-qualified HDHP telehealth safe harbor was provided under the “CARES Act” effective on March 27, 2020, for plan years beginning on or before December 31, 2021, permitting HDHPs to cover telehealth or other remote-care services before the plan’s deductible was met. Subsequent legislation further extended the telehealth flexibility from April 1, 2022, through December 31, 2022, and then it was again further extended for plan years beginning after December 31, 2022, and before January 1, 2025. The extension has now ended for calendar year plans starting January 1, 2025, or later. Non-calendar year plans may continue to provide pre-deductible telehealth into 2025, but only through the run-out of the current plan year that started in 2024.

Next Steps
With the end of the extension, HDHPs should now be amended so that any telehealth items or services (other than preventive) provided before the deductible is met are subject to cost-sharing. If the HDHP were to permit reimbursement for telehealth services before the deductible is met, the HDHP would not be HSA-qualified, and participants could not contribute to an HSA for that plan year. To address this, participants could be required to pay the fair market value (FMV) of the services (or managed care rates for discounted health services, if applicable) until the HDHP deductible is satisfied. Then once their HDHP deductibles have been satisfied, they can have access to free or low-cost medical benefits without jeopardizing their HSA eligibility.

Employers who intend to ensure that their employees remain HSA eligible during the 2025 plan year and beyond would want to consider making changes to their telehealth benefit offerings to preserve HSA eligibility. If further relief is not provided, the simplest solution may be to remove access to telehealth for those enrolled in the employer’s qualified HDHP. Alternatively, an employer could choose to charge FMV for a telehealth visit until the minimum HDHP deductible is met. Plan sponsors should contact their HDHP administrator to determine how they will address telehealth coverage now that the safe harbor has ended, and how communication to participants will be handled.

We expect this issue will again eventually be addressed in the next Congress, but in the meantime, the current extension expires for plan years beginning on or after January 1, 2025. We will keep our clients updated on efforts to restore the telehealth flexibility and any additional guidance from the administration or passed by Congress.

Should you have questions, contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

The IRS has issued two new Notices expanding the list of items and services that qualify as “preventive care” under health savings account (HSA)-compatible high deductible health plans (HDHPs) and as medical care expenses under group health plans. One Notice provides that condoms are now considered “medical care” expenses and can be covered/reimbursed by group health plans, including FSAs, HRAs and HSAs. The Notices take effect retroactively and provide that HSA-eligible HDHPs can permit pre-deductible coverage of certain over-the-counter (OTC) contraceptives, glucose/insulin treatment and breast cancer screening without affecting eligibility for HSAs.

Coinciding with the release of these Notices, the agencies proposed regulations to amend current Affordable Care Act (ACA) rules that would require preventive care to include certain OTC contraception (including condoms) without cost sharing and without a prescription.

1. Under Notice 2024-71, amounts paid for condoms can be reimbursed under a health FSA, HRA, HSA, or Archer MSA.
2. Under Notice 2024-75, the IRS retroactively expanded the list of preventive care benefits for HDHPs (see bullets below) without a deductible or with a deductible below the HDHP minimum deductible. Individuals must be covered by an HDHP (and have no disqualifying health coverage) to be eligible to contribute to an HSA.

• OTC oral contraceptives, including OTC birth control pills and emergency contraceptives, for individuals potentially capable of becoming pregnant, regardless of whether they are purchased with a prescription.
• Male condoms, regardless of whether they are purchased with a prescription and regardless of the gender of the individual covered by the HDHP who purchases them (does not include male sterilization and other male contraceptives).
• All types of breast cancer screenings other than mammograms (e.g., MRIs or ultrasounds) for individuals who have not been diagnosed with breast cancer.
• Continuous glucose monitors for individuals diagnosed with diabetes.
• Selected insulin products, regardless of whether they are prescribed to treat an individual diagnosed with diabetes or prescribed for the purpose of preventing the exacerbation of diabetes or the development of a secondary condition.

Note that Notice 2024-75 only addresses items that may be treated as preventive care for purposes of the HDHP preventive care safe harbor. It does not address what the ACA requires non-grandfathered health plans to cover in the way of specific recommended “preventive care services” on a “first-dollar basis” (that is, without any copayments, deductibles or other cost sharing). So, for example, currently the ACA’s preventive care mandate requires health plans to cover OTC preventive products without cost sharing only when they are prescribed by a health care provider. However, the agencies have recently released proposed preventive services regulations that may impact some of these issues.

These proposed rules would require, for the first time, that most group health plans cover OTC contraceptives without cost sharing and without a prescription. The proposed rules also would require these plans to cover all recommended contraceptive drugs and drug-led combination products, unless a therapeutic equivalent is already covered without cost sharing. The proposed effective date for these requirements is plan years beginning on or after January 1, 2026. Lastly, it is possible the U.S. Supreme Court may take up a closely watched case (see petition for certiorari) impacting the ACA’s preventive services mandate. If certiorari is granted, we would expect the outcome of the case to provide much needed clarification on preventive service mandate issues.

Health FSA, HRA, and HDHP administrators will want to take note of the guidance from the new Notices referenced above, which will be good news for participants and HSA account holders. Employers with HDHPs should review their plans’ design and consider whether to cover these expanded items without a deductible. Keep in mind that changes made as a result of the guidance may require plan amendments and changes to summary plan descriptions or other communications to participants.

Should you have questions, contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

The Affordable Care Act (“ACA”) affordability threshold typically changes every year. As is customary, the IRS has announced the 2025 threshold amount that will increase to 9.02% (from 8.39% in 2024). By way of background, determining whether employer-sponsored health plans meet the ACA affordability and minimum value standards remains a significant factor for an Applicable Large Employer or “ALE” to consider in determining potential liability for pay or play/employer mandate penalties. This generally means that if an employee’s share of the premium for employer-provided coverage for 2025 is more than 9.02% of his or her “household income,” the coverage is not considered affordable for that employee and the ALE may be liable for a penalty if that employee obtains a premium tax credit through an ACA Exchange/Marketplace. Employers and plan sponsors need to carefully review this change and the increased percentage to ensure plans understand/comply with affordability.

Minimum Value and Affordable Offers

An ALE avoids a potential penalty if at least one of its health plans provides minimum value and is offered at an affordable price to full-time employees (“FTEs”). Thus, ALEs should be annually considering the new affordability percentage to determine if they are subsidizing enough of the employee’s (self-only) premium. Otherwise, if the coverage is not affordable and the FTE then obtains a subsidy in the Exchange, the ALE is subject to a penalty.

2025 Plan Design Considerations

ALEs may use an affordability safe harbor to measure the affordability of their coverage and may rely on the adjusted affordability contribution percentages for each year. The three safe harbors that measure affordability are based on Form W-2 wages from that employer, the employee’s rate of pay, or the federal poverty line (FPL) for a single individual. The affordability test applies only to the portion of the annual premium for self-only coverage and does not include any additional cost for family coverage. Also, if an employer offers multiple health coverage options, the affordability test applies to the lowest-cost option that also satisfies the ACA minimum value requirement. Some employers will simplify affordability compliance by using the FPL safe harbor and offering at least one medical plan option to FTEs for 2025 with an employee premium share not exceeding $113.20 per month for employee-only coverage.

ALE Reporting Requirement

ALEs must report to the IRS on Forms 1094/5-C if they are offering affordable health care options to FTEs and dependents. The determination of whether an ALE may be liable for a penalty is based on information reported on those Forms. The affordability of health coverage is a key point in determining whether an ALE will be subject to a penalty. Many ALEs have received IRS letters informing them of ACA employer mandate pay or play penalty assessments. See this IRS webpage for more details on the employer mandate and reporting, and the pay or play penalty assessment process.

Employer Next Steps

ALEs must stay updated on their compliance with the always evolving ACA employer mandate rules and regulations. When planning for the 2025 plan year, ALEs should confirm that at least one of their minimum value plans meets one of the affordability safe harbors for each of its FTEs in order to avoid a potential pay or play penalty. Employers should also act quickly in response to any IRS employer mandate penalty notice or letter. The IRS generally expects a response within 30 days, although extensions can typically be requested if needed.

Your Conner Strong & Buckelew account team will continue to work with you to understand the complex requirements of the ACA. The account team will also assist in evaluating the new percentage as it relates to the impact on your plan’s adherence. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.