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The Wagner Law Group

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 


Established in 1996, The Wagner Law Group has 27 attorneys engaged exclusively in employee benefits, estate planning and employment law. Six of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.





Contact Info

The Wagner Law Group


  Integrity | Excellence



Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110

Palm Beach Gardens 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418



Tel: (813) 603-2959

Fax: (813) 603-2961

101 East Kennedy Boulevard

Suite 2140
Tampa, FL  33602 


San Francisco

Tel: (415) 625-0002

Fax: (415) 358-8300

300 Montgomery Street

Suite 600

San Francisco, CA 94104


St. Louis

Tel: (314) 236-0065

Fax: (314) 236-5743
100 South 4th Street, Suite 550
St. Louis, MO  63102 







January 12, 2017


 Health and Welfare Law Alert




IRS Delays Final Rules on Impact of Opt-Out Payments on ACA Affordability Analysis  






The IRS has issued final regulations relating to the Affordable Care Act ("ACA") premium tax credits for eligible individuals who enroll in Marketplace coverage.  While these regulations finalize many of the provisions contained in the proposed regulations (See the 8/4/16 Alert.), the IRS did not issue final rules concerning the impact of opt-out payments on the affordability of employer-provided health coverage for purposes of the ACA's employer shared responsibility penalty.  As a result, the transition relief provided in IRS Notice 2015-87 (for opt-out arrangements in effect before December 16, 2015) continues to apply for 2017.



Background.  An opt-out payment occurs when an employer offers a cash payment if an employee declines to enroll in the employer's group health plan.  The IRS has previously confirmed that "unconditional opt-out payments" must be factored into the affordability analysis employers use to determine if the group health coverage offered to employees is affordable for purposes of the ACA's employer mandate. 



An "unconditional" opt-out payment is a payment that is solely conditioned on an employee's declining the employer's group health care coverage.  Unconditional opt-out payments are treated the same as a salary reduction contribution for purposes of determining an employee's required contribution under the ACA's affordability analysis.  As a result, the amount of the employee's actual premium contribution, plus the unconditional opt-out payment, will be the total amount used to determine affordability. 



Transition Relief.  In Notice 2015-87, the IRS indicated that the final rules for opt-out payments will apply only after the effective date of the final regulations.  Accordingly, employers may continue to rely on the transition relief provided in Notice 2015-87. 



Generally, the transition relief in Notice 2015-87 provides that for purposes of employer shared responsibility reporting (i.e., Forms 1095-C), employers offering arrangements that satisfy the transition relief requirements need not increase an employee's required contribution by the opt-out payment amount.  The transition relief, however, only applies for opt-out arrangements adopted before December 16, 2015.



Final Regulations.  Highlights from the final regulations that relate to the ACA affordability analysis and opt-out payments include confirmation from the IRS that:


  • unless an opt-out arrangement qualifies as an eligible opt-out arrangement, opt-out payments made under such arrangements will be taken into consideration (i.e., added to the amount that the employee must pay for the employer's group health coverage) when calculating the amount of the employee's required contribution.
  • it is still reviewing issues presented by opt-out arrangements and that it will finalize these rules separately.
  • employers may continue to rely on the transition relief (applicable to opt-out payments) provided in IRS Notice 2015-87.


The final regulations are available at: https://www.gpo.gov/fdsys/pkg/FR-2016-12-19/pdf/2016-30037.pdf




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This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.