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IRS Releases Guidance on Association Health Plans (AHP)

08/28/2018

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IRS releases FAQ discussing the effect of association health plan (AHP) coverage on the employer shared responsibility requirements.

On August 20, 2018, the DOL and IRS released the following FAQ. The updated FAQ on the employer shared responsibility provisions of the Affordable Care Act page addresses the effect of an employer offering coverage through an AHP. 

18. Do the employer shared responsibility provisions apply if an employer that is not otherwise an applicable large employer (ALE) offers coverage through an Association Health Plan (AHP)?

No. Whether an employer member of an association that offers coverage through an AHP is an ALE that is subject to the employer shared responsibility provisions depends on the number of full-time employees (and full-time equivalent employees) the member employer employed in the prior calendar year and is unrelated to whether the employer offers coverage through an AHP. An employer that is not an ALE under the employer shared responsibility provisions does not become an ALE due to participation in an AHP, and an employer that is an ALE under the employer shared responsibility provisions continues to be an ALE subject to the employer shared responsibility provisions regardless of its participation in an AHP. (The only circumstances in which multiple employers are treated as a single employer for purposes of determining whether the employer is an ALE is if the employers have a certain level of common or related ownership).

What does this mean for small employers?

Participation in an AHP won’t subject a small employer (one with less than 50 full-time equivalent employees)  to the employer mandate. The IRS states that the employer mandate doesn’t apply if an employer that’s not otherwise an applicable large employer offers health coverage through an AHP. This means if a small employer joins an AHP as a means of delivering health coverage to its employees, they will not become an ALE, even if the AHP’s total covered employees include more than 50-full time equivalent employees.

For more information on AHPs, see regulations issued on June 21, 2018, by the Department of Labor.

LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.