The postponement of the employer mandate or “shared responsibility provision” of Health Care Reform until 2015 was a welcome reprieve for many employers. It has led many organizations to browse through other Health Care Reform provisions and timelines. In doing so, several employers have expressed concern regarding the “automatic enrollment” provision which many expected to be implemented in 2014. However, it is important to note that in 2012, the IRS announced the indefinite delay of the automatic enrollment amendment to the Fair Labor Standard Act (FLSA).

The Patient Protection and Affordable Care Act (PPACA) amended the FLSA to require employers with more than 200 full-time employees to automatically enroll new full-time employees in one of the organization’s health benefit plans. The provision also requires the employer to provide adequate notice to the employee as well as the opportunity for the employee to opt out of the health plan. For the purpose of this provision, a full-time employee is defined as one that averages 30 or more hours per week.

While the effective date of the automatic enrollment amendment was unclear in the original legislation, the US Department of Labor stated that it intended to issue automatic enrollment guidance prior to 2014. As a result, most experts anticipated a 1/1/2014 compliance date. However, in 2012, the IRS issued a release stating that, “its automatic enrollment guidance will not be ready to take effect by 2014.” Though, it is still possible that such guidance could be issued in the near future and the compliance date could be later in 2014 or beyond. Many experts believe that a 1/1/15 compliance effective date is the most likely outcome, as the automatic enrollment provision will thus coincide with the employer mandate provision.

The federal government has stated its intention to provide at least a six-month implementation period for employers following the issuance of formal IRS guidance on specific Health Care Reform provisions. Therefore, it is fairly safe to assume that once guidance is issued regarding automatic enrollment, organizations will have at least six months to implement the provision prior to the compliance date.

Employers are anticipating the automatic enrollment guidance to answer many of their inquiries regarding this provision. Perhaps the most important question entails the default plan into which the employer is required to automatically enroll the employee. Additionally, employers are curious as to how to handle employees who were automatically enrolled, but wish to make changes to their benefits plan. For example, employers await guidance as to whether unhappy automatic enrollees will be allowed to drop coverage altogether, or whether their available option will permit them to switch from the default coverage option to other plan selections. The timing requirement for such changes is another factor for which many employers will need to obtain clarification.

Automatic enrollment is one Health Care Reform provision that employers may place on the backburner for now, as there is clearly not enough information to begin the implementation process. However, once the federal government provides direction with respect to automatic enrollment, employers with 200 or more full- time employees will need to consider implementation timeframes, internal resources and possibly outsourcing options.

Should you have questions regarding the automatic enrollment requirement or other Health Care Reform provisions, we recommend directing them to your Health Insurance Broker, Health Insurance Carrier, Human Resources Professional or Accounting/Tax Professional.

By HR Pros of the HR Support Center (September 2013)