IRS Delaying ACA Provision on Equal Coverage by Employers

The Internal Revenue Service last week signaled that it is delaying enforcement of a provision in the Affordable Care Act that prohibits employers from offering better health insurance benefits to executives than to other employees, the New York Times reports.

Under the ACA, employer-sponsored plans are prohibited from having different eligibility standards or benefits that might favor "highly compensated individuals." Such plans must also offer the same benefits to the dependents of executives and other employees. In addition, employers are barred from offering the coverage to executives at no cost while requiring other employees to pay some percentage of the cost. Employers who violate the ban would face an excise tax penalty of $100 per day per affected individual (Pear, New York Times, 1/18).

A similar ban already applies to self-insured employers, but the ACA provision would extend that policy to employers that purchase insurance from commercial carriers.

The provision was scheduled to take effect in 2010, soon after the ACA was enacted. However, the IRS asked for an extension and said it would have the final regulations in place before January 2014 (Beech, Reuters, 1/18).

Last week, IRS officials said the agency would not enforce the provision this year because it has yet to issue final regulations governing the provision and guidance for employers. IRS spokesperson Bruce Friedland noted that employers will not have to comply with the requirement until the agency issues the final rule or guidance.

According to the Times, the IRS has yet to resolve several regulatory questions related to the rule, including:

• How to measure the value of employee health benefits;
• How to define "highly compensated";
• What actions define discrimination under the ban; and
• Whether the ban applies to employers that offer the same insurance to all employees, but large numbers of lower-income workers instead opt for coverage from other sources.

The agency also is delaying the rule in order to simultaneously review the existing nondiscrimination rules as they apply to self-insured employers, the Times reports (New York Times, 1/18).