PEOs get Favorable ruling on ACA from the Treasury Department
PEO group health care plans to be treated as employer sponsored plans
The IRS released final regulations on the requirement that individuals purchase health insurance adheres to the minimum essential coverage standard known as the individual mandate. These rules provided definition to those Professional Employer Organizations – PEOs offering group health plan coverage to employees on behalf of a PEO client employer. Th individual mandate requirement is satisfied by maintaining coverage under an eligible employer-sponsored plan. These new regulations include an eligible employer-sponsored plan offered by a PEO on behalf of a PEO client employer.
Specifically, the definition of eligible employer-sponsored plan in the final regulations (Section 1.5000A-2(c)) provides that an eligible employer-sponsored plan includes, in addition to coverage offered by an employer, (i) group health insurance coverage offered on behalf of an employer to an employee and (ii) a self-insured group health plan under which coverage is offered by, or on behalf of, an employer to the employee.
Individual Mandate Satisfied for PEO worksite employees with PEO sponsored health plans
The final regulations explicitly states that organizations PEOs can offer coverage under an eligible employer-sponsored plan on behalf of an employer, yet not be viewed as the employer by reason of offering such coverage. This is an important win for PEOs who provide quality health insurance coverage to their client companies and their associated worksite employees. In addition ruling maintains the ability of PEOs to offer access to health insurance as a major plank of the PEO value proposition for their client companies.
Office of Federal Register Documents
The office of the federal register document for this is:
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Shared Responsibility Payment for Not Maintaining Minimum Essential Coverage
Page 20 of the document address plans offered by PEOs
4. Plans Offered on Behalf of Employers
The Treasury Department and the IRS received comments asking whether medical coverage offered to employees by an organization acting on behalf of an employer qualifies as an eligible employer-sponsored plan. For example, commentators asked whether a multiemployer plan or a single employer collectively-bargained plan is an eligible employer-sponsored plan for the employees covered by the collective bargaining arrangement and eligible to participate in the plan. In addition, commentators asked whether a plan offered to an employer’s employees by a third party, such as a professional employer organization or leasing company, is an eligible employer-sponsored plan for the employees eligible to participate in the plan. The final regulations are revised to provide that a plan offered by an employer to an employee includes a plan offered to an employee on behalf of an employer. No inference is intended from this treatment that the third party is the employer for this or any other provision of the Code or related laws.
The final regulations are expected to be published in the Federal Register on August 30, 2013.Office of Federal Registery PDF File