Employer Mandate

Under Internal Revenue Code section 4980H, an Applicable Large Employer may be subject to a penalty if it does not offer its full-time employees, and their dependents, minimum essential coverage that is affordable and provides minimum value.

What is Minimum Essential Coverage?

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For purposes of Internal Revenue Code section 4980H, minimum essential coverage (MEC) is defined broadly to include any eligible employer-sponsored plan offered in either the small or large group market and includes grandfathered plans.

To be considered an offer of MEC, an employee must be given an effective opportunity to enroll in or decline coverage. However, an effective opportunity to decline is not required if the offer of MEC providing minimum value is offered at either: (1) no cost to the employee, or (2) if the employee’s required monthly contribution for the lowest cost self-only coverage does not exceed 9.5 percent (indexed annually) of the federal poverty line for a single individual for the calendar year, divided by 12.

If the employee’s required contribution is more, the employer should allow employees to decline coverage for any reason. If a waiver of coverage is conditioned upon proof or certification of other coverage, it makes it impossible for the employee to decline coverage for any reason. As a result, the employer can be treated as though it did not make an offer of MEC to these employees under the Employer Mandate, which could impact meeting the 95 percent threshold.

Additional information on what constitutes an offer of minimum essential coverage and waivers of coverage can be found in our Briefings linked below.


Additional Information
Health Care Reform: IRC §4980H Offer of Minimum Essential Coverage
This Briefing explains what constitutes an offer of coverage for purposes of section Internal Revenue Code section 4980H.
Health Care Reform: Issues to Consider with Waivers of Coverage and Cash-in-Lieu of Benefits
The Affordable Care Act added some new considerations into the mix that employers must take into account when it comes to waivers of coverage. This Briefing discusses the issues along with suggestions for addressing them.