Tax Facts

8874 / Can an employer offer high-risk employees a choice between enrollment in a group health plan or cash without violating the Affordable Care Act market reform provisions?

No. The Department of Labor has released guidance providing that an employer who offers high-risk employees a choice between enrollment in a group health plan or cash violates the nondiscrimination requirements of the Affordable Care Act.1 This is the case regardless of whether the cash payment is pre-tax or after-tax and regardless of whether the employee obtains individual health coverage from another source.2

1. IRC § 9815.

2. DOL FAQ About the Affordable Care Act Implementation (Part XXII), available at: https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-xxii.pdf (last accessed September 28, 2024).

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