Automatic Enrollment Requirements FAQs
The Affordable Care Act (ACA) requires certain large employers that offer health coverage to automatically enroll new employees (and re-enroll current employees) in one of the employer’s health plans, subject to any permissible waiting period.
This requirement is found in Section 18A of the Fair Labor Standards Act (FLSA), which was created by the ACA. Employers are not yet required to comply with Section 18A. They will not have to comply until final regulations are issued and a final effective date is specified.
When it is effective, the automatic enrollment rule will apply to employers that are subject to the FLSA and have more than 200 full-time employees. Section 18A further requires adequate notice to employees and the opportunity for an employee to opt out of any coverage in which the employee was automatically enrolled.
On Dec. 22, 2010, the Departments of Health and Human Services, Labor and Treasury issued frequently asked questions(FAQ) on section 18A of the FLSA. Additionally, on February 9, 2012, the Department of Labor (DOL) issued Technical Release 2012-01to answer questions from employers and other stakeholders on ACA’s provisions regarding automatic enrollment.
This Custom Benefit Consultants, Inc. Legislative Brief contains the 2010 FAQs and the DOL’s guidance in Technical Release 2012-01 on automatic enrollment.
Automatic Enrollment in Health Plans
Q1: The Affordable Care Act amended the Fair Labor Standards Act (FLSA) by adding a new section 18A, requiring employers with more than 200 full-time employees to automatically enroll new full-time employees in the employer’s health benefits plans and continue enrollment of current employees. What Agency is responsible for guidance under this new FLSA provision?A: The Secretary of Labor has delegated responsibility for FLSA section 18A rulemaking, and for regulations under new section 18B of the FLSA, Notice to Employees of Coverage Options, to the Employee Benefits Security Administration (EBSA) within the Department of Labor. EBSA and the Department of the Treasury will coordinate to develop the rules that will apply in determining full-time employee status for purposes of the amendments to the FLSA and the rulemaking by the Treasury Department under the Internal Revenue Code to develop the rules that will apply in determining full-time employee status for purposes of the amendments made by the Affordable Care Act to the Internal Revenue Code.
Q2: What Agency is responsible for guidance under section 18A of the FLSA?
A: The Secretary of Labor has delegated responsibility for FLSA section 18A rulemaking, and for regulations under new section 18B of the FLSA, Notice to Employees of Coverage Options, to the Employee Benefits Security Administration (EBSA) within the DOL.
EBSA and the Treasury will coordinate to develop the rules that will apply in determining full-time employee status for purposes of the amendments to the FLSA and the rulemaking by the Treasury under the Internal Revenue Code to develop the rules that will apply in determining full-time employee status for purposes of the amendments made by the ACA to the Internal Revenue Code.
Q3: When do employers have to comply with the new automatic enrollment requirements in section 18A of the FLSA?
A: Section 18A provides that employer compliance with the automatic enrollment provisions of that section shall be carried out “[i]n accordance with regulations promulgated by the Secretary [of Labor].” Accordingly, it is the view of the Department of Labor that, until such regulations are issued, employers are not required to comply with section 18A.
The Department of Labor expects to work with stakeholders to ensure that it has the necessary information and data it needs to develop regulations in this area that take into account the practices employers currently use for auto-enrollment and to solicit the views and practices of a broad range of stakeholders, including employers, workers and their families. The Department of Labor intends to complete this rulemaking by 2014.
Update: In Technical Release 2012-01, the DOL stated that in view of the need for coordinated guidance and a smooth implementation process, including an applicability date that gives employers sufficient time to comply, the automatic enrollment guidance will not be ready to take effect by 2014. It remains the DOL’s view that, until final regulations under FLSA section 18A are issued and become applicable, employers are not required to comply with FLSA section 18A.
Q3: What is the current timeline for issuing guidance on automatic enrollment under FLSA section 18A?
A:The DOL has been working with stakeholders to ensure that it has the necessary information and data to develop regulations relating to automatic enrollment, and is sensitive to stakeholder concerns regarding the need for adequate time to comply with any regulations that are ultimately issued. In addition, the DOL is aware of the need to coordinate the work it will be undertaking to develop guidance relating to automatic enrollment with the guidance being developed regarding other related ACA provisions, including the employer shared responsibility provision and the 90-day limitation on waiting periods.
The DOL originally intended to complete this rulemaking by 2014. In view of the need for coordinated guidance and a smooth implementation process, including an applicability date that gives employers sufficient time to comply, the DOL has concluded that its automatic enrollment guidance will not be ready to take effect by 2014.
Source: U.S. Department of Labor
