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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 24 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 







August 4, 2016


 Health and Welfare Law Alert




 IRS Guidance on Impact of Opt-out

Payments on ACA Affordability






The IRS has issued proposed regulations addressing how opt-out payments affect the Affordable Care Act's ("ACA's") affordability requirements. The ACA's employer mandate requires applicable large employers to either offer affordable coverage or pay a penalty when employees receive a premium tax credit for coverage purchased in the ACA Marketplace.


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-opt 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. (See the 1/8/16 Alert.)


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-opt payment will be the total amount used to determine affordability.


Proposed Regulations. The IRS's proposed regulations confirm that for purposes of determining whether the employer's group health coverage is affordable, an employee's required contribution will be increased by the amount of any unconditional opt-out payment made available by the employer. In general, this rule applies regardless of whether the employee actually enrolls in the employer's group health plan.


The proposed regulations do, however, provide an exception to the general rule described above for "conditional opt-out payments" A conditional opt-out payment is defined as an arrangement that conditions the employee's receipt of the cash payment on the employee's: (i) declining coverage in the employer's group health plan, and (ii) providing reasonable evidence that the employee and the employee's "expected tax family" have, or will have, alternative minimum essential coverage through another group health plan.


Note: The IRS has confirmed that the alternative minimum essential coverage must be group health coverage and not individual coverage (which includes coverage obtained through the ACA Marketplace).


According to the IRS, reasonable evidence of alternative coverage includes attestation that the employee and all of the employee's expected tax family have or will have minimum essential group health coverage.


Takeaway for Employers. The proposed regulations are slated to become effective on the first day of the first plan year beginning on or after January 1, 2017. Employers that are subject to the ACA's employer mandate and who provide opt-out payments are advised to consult with qualified benefits professionals to ensure compliance with the proposed regulations.


The IRS's proposed regulations are available at: https://www.gpo.gov/fdsys/pkg/FR-2016-07-08/pdf/2016-15940.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.