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ACA’s automatic enrollment requirement repealed

November 12, 2015 Article 2 min read

Quick facts 

  • On Nov. 2, 2015, a law was enacted to repealthe ACA’s automatic enrollmentrequirement.
  • Employers will not be required toautomatically enroll employees in coverage.
  • In certain cases, employers can choose toimplement an automatic enrollmentprocess, ifemployees are providedadequate notice and an opportunity to optout.

TheAffordable Care Act (ACA) included an automatic enrollment requirement for certain large employers. Thisrequirement was not yet effective. It was intended to take effect once final regulations were issued and a finaleffective date was specified.

On Nov.2, 2015, President Obama signed into law theBipartisan Budget Act of 2015, which included aprovisionrepealing the ACA’s automatic enrollment requirement.

Therefore, this requirement will not take effect at any point, and employers will not be required toautomatically enroll employeesin their group health plan coverage.

Overview of automatic enrollment

Under the ACA, certain large employers that offer health coverage would have been required to automaticallyenroll new employees (and re-enroll current employees) in one of theemployer’s health plans, subject to anypermissible waiting period.
The ACA further required adequate notice to employees and the opportunity for an employee to opt out ofany coverage in which the employee was automatically enrolled.
This automatic enrollment requirement would have applied to employers subject to the Fair Labor StandardsAct (FLSA) with more than 200 full-time employees.
On Dec. 22, 2010, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury(Departments) issuedFAQson the automatic enrollment requirement. Also, on Feb. 9, 2012, the DOL issuedTechnical Release 2012-01to answer questions fromemployers and other stakeholders on this provision.
However, the Departments did not issue regulations or other final guidance regarding the ACA’s automatic enrollment requirement.As a result, this requirement never took effect for any employers. The repeal ensures that no employers will be required to complywith the ACA’s automatic enrollment requirement at any point.

Impact of the repeal on employers

If the ACA’s automatic enrollment requirement had been implemented, employers that offer group healthplan coverage would havebeen required to automatically enroll new employees (and re-enroll current employees) in the coverage, even if those employeesdid not elect coverage.

A number of experts expressed questions and concerns about this automatic enrollment requirement, primarily on how employerswould effectively administer the provision. According to some, this could have caused a number of problems, such as havingemployees enrolled in the employer’s coverage who are also covered by a spouse’s plan.

Although the ACA’s automatic enrollment requirement has now been repealed, the Internal Revenue Service (IRS) has previouslyissued guidance inInternal Revenue Bulletin 2002-20and in aproposed rule from 2007that employers can choose to use anautomatic enrollment process under certain circumstances. This wouldallowan employerto enroll an eligible employee in theemployer’s plan,unless the employee affirmatively elects otherwise.This process often involves a deductionfromthe employee’swagesthat iscontributed to the plan on the employee’s behalf.

In general, any employer using an automatic enrollment arrangement would need to provideadequate notice to employees andanopportunity for employeesto opt out ofthecoverage. Employers should also be aware of any applicable wage withholding laws intheir 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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