Human Resources
Up in Smoke?—IRS Filters Out Most Wellness Programs From Affordability and Minimum Value Tests and Clears the Air on COBRA and Retiree Medical Coverage

Up in Smoke?—IRS Filters Out Most Wellness Programs From Affordability and Minimum Value Tests and Clears the Air on COBRA and Retiree Medical Coverage


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Employers may only take into account whether a plan participant qualifies for an incentive or reward under a group health plan’s wellness program that is designed to prevent or reduce tobacco use when determining the plan’s affordability and minimum value under the Patient Protection and Affordable Care Act (Affordable Care Act), according to proposed regulations released by the Internal Revenue Service (IRS) on April 30, 2013. In calculating a plan’s affordability and minimum value, wellness program incentives and rewards that do not relate to tobacco use are not taken into account and are treated as not earned.

The proposed regulations, which become effective in plan years beginning after 2014, provide a transition rule for affordability and minimum value determinations made by plans with wellness programs in plan years beginning in 2014.

The proposed regulations also address contributions to health reimbursement arrangements (HRAs) and health savings accounts (HSAs) for purposes of determining affordability and minimum value and discuss the impact of COBRA coverage and retiree medical coverage on an individual’s ability to obtain a premium tax credit through an Exchange (marketplace).

In other Affordable Care Act developments, the Department of Health and Human Services (HHS) released new, shorter insurance applications for individuals and families that wish to purchase health coverage through an Exchange.

The Aon Hewitt bulletin below discusses both of these releases.

Download Up In Smoke?—IRS Filters Out Most Wellness Programs From Affordability and Minimum Value Tests and Clears the Air on COBRA and Retiree Medical Coverage