Employers that sponsor group health plans typically require enrolled employees to pay a portion of the monthly premium according to a cost-share model (also referred to as a contribution model). While employers have broad discretion to structure cost-share models for dental, vision, life, and disability benefits as they see fit (provided they do not charge employees more than the gross premium), there are several compliance considerations regarding cost-share models for medical plans.
This publication addresses the key medical cost-share considerations for applicable large employers (ALEs) — that is, employers with a combined total of 50 or more fulltime employees (FTEs), including full-time equivalents and counting all employees in an IRC Section 414 controlled group. It summarizes the ACA affordability test and safe harbors and discusses a variety of employer cost-sharing arrangements, including models based on premium discounts or surcharges, salary bands, and base/buy-up structures. It addresses special considerations regarding opt-out or waiver incentives (cash in lieu of benefits) and provides a general overview of the nondiscrimination rules that apply to cost-sharing arrangements for fully insured and self-insured plans.
The publication also includes appendices with details of the Employer Mandate affordability threshold and penalties (Appendix A), a chart of Sample ACA Affordability Safe Harbor Calculations (Appendix B), a Sample Notice for Employer Sponsored Wellness Programs (Appendix C), a Sample Notice of Availability of Reasonable Alternative Standard (Appendix D), and IRS Limits on Retirement Benefits and Compensation (Appendix E).
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