If an employee is on Medicare – can they drop the group plan and
be reimbursed for Medicare Premiums by the employer?
If we make payment of the opt-out bonus also contingent on the employee proving that they have other employer-sponsored coverage (or Medicare, Tricare, etc.), then would the opt-out bonus [see question # 71 Section 125 Cafeteria plans] still have to be treated as increasing the employee’s contribution?
It would unless certain requirements are met. For plan years that start on or after January 1, 2017, a conditional opt-out bonus will not affect the affordability calculation only if the payment of the opt-out bonus is conditioned on all of the following requirements:
- The employee must decline to enroll in the employer-sponsored coverage; and
- The employee must provide reasonable evidence that the employee and all other individuals for whom the employee reasonably expects to claim a personal exemption deduction for the taxable year or years that begin or end in or with the employer’s plan year to which the opt-out arrangement applies (“employee’s expected tax family”) have or will have minimum essential coverage (other than coverage in the individual market, whether or not obtained through the Marketplace) during the period of coverage to which the opt-out arrangement applies. Reasonable evidence of alternative coverage can include the employee’s attestation that the employee and all other members of the employee’s expected tax family, if any, have or will have minimum essential coverage, or any other reasonable evidence; and
- The arrangement must also provide that any opt-out payment cannot be made if the employer knows or has reason to know that the employee or any other member of the employee’s expected tax family does not have (or will not have) the required alternative coverage; and
- The opt-out arrangement must also require that the evidence of other coverage be provided no less frequently than every plan year to which the eligible opt-out arrangement applies, and that the evidence be provided no earlier than a reasonable period before the commencement of the period of coverage to which the eligible opt-out arrangement applies.
Assuming all the above requirements are met, a conditional opt-out payment may be excluded from the employee’s required contribution for the remainder of the plan year, even if the alternative coverage subsequently terminates for the employee or any other member of the employee’s expected tax family. AJG.com Quesiton # 72
On the other hand
It’s illegal for an employer to offer any incentives to encourage you to take Medicare and drop the employer plan! Coremarkins * The Age Discrimination in Employment Act (ADEA) prohibits employers with 20 or more employees from cancelling group health coverage for current employees due to age, even when such employees become eligible for Medicare. SHRM *
Here’s the Full Question
Your site came up as I was trying to get some information regarding the above. I am employed in a small law office. Briefly, currently employer offers health insurance which covers me and my wife. $3000 HRA set up to cover deductible. Employer pays 80% of insurance premium. My wife is 68, employed but retiring in July. I am 70. I would like for both of us to go full medicare and have employer pay for or reimburse for premiums for medicare and Part D and supplemental Plan G for both of us. It appears that the costs would be less than the total of the $3000.00 HRA and the 80% employer currently pays. There are 12 employees. The head of the firm is enrolled in medicare and one other employee. I understand that she will be enrolling in the office health insurance plan as secondary to medicare.
I am very confused by what I have read on-line as it relates to ACA compliance, pre-taxing, equal treatment of employees. There are probably issues I have not thought about.
Can you help me or can you suggest a source to assist me.
Links, Comments & Resources
Visit our Medicare Webpage on pros & cons and what Medicare Eligible Employees might do and consider
Employer Reporting of Creditable Coverage to Medicare
Medicare & Dual Coverage – i.e. employer coverage?
Looks like one must have a Section 125 plan to do it.
Cash in lieu of benefits – Johnson Dugan.com
SHRM.org What is a health insurance opt out?
Nope, can’t reimburse.
Care Plus Benefits.com employers cannot offer any “financial or other incentive” for an individual entitled to Medicare
“not to enroll (or terminate enrollment) under” a group health plan that would pay primary.
Private Letter Ruling 9406002 IRC Section 61
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