When considering what constitutes affordable coverage under the Affordable Care Act, many employers simply charge every worker 9.5% of their salary.
However, things aren’t that easy. The Employee Retirement Income Security Act (ERISA) also sets rules for employee contributions to health plans. Although ERISA usually doesn’t require businesses to offer all employees the same benefits, coverage must be non-discriminatory. The Health Insurance Portability and Accountability Act (HIPAA) prohibits charging employees different contributions based on health factors – but does allow employers to make other distinctions in benefits costs, as long as these differences are not discriminatory.
To avoid discrimination, plans must limit distinctions among employees to such “bona fide employment-based classifications,” such as full-time or part-time status, geographic location, and salaried versus hourly compensation. In some cases, employers may charge different rates based on length of service, provided these distinctions don’t violate age discrimination rules.
As you prepare your compliance program, be sure to review your job classifications. For example, let’s say that two employees do the same job, but one makes $1.00 an hour more simply because she has been on the job longer. Charging both of these workers 9.5% of their wages for health insurance contributions might be considered discriminatory under ERISA.
Before assuming that you can charge all employees 9.5% of box 1 of their W-2s for health coverage, consider the ERISA regulations to make sure that you have the right plan language and limits in place. Remember, ACA compliance also includes complying with ERISA standards.
We’d be happy to offer our advice on this complex issue.