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As promised by the Centers for Medicare & Medicaid Services (CMS) in late-2015, the Federally-Facilitated Marketplaces (FFMs) have started sending notices informing employers that employees have enrolled in a FFM and were determined eligible for premium subsidies. Because the employer shared responsibility penalties set forth in Section 4980H of the Internal Revenue Code (the “Code”) could be triggered when at least one full-time employee obtains a premium subsidy on the Marketplace, an employer receiving one of these notices should understandably be concerned about the possibility of penalties.  Nevertheless, these notices do not guarantee that a penalty will be assessed.  Here’s what employers should know:

On Thursday, September 18, 2014, the Internal Revenue Service (“IRS”) released Notice 2014-55, which expands the cafeteria plan “change in status” rules to allow plans to offer employees an option to revoke their elections for employer-sponsored health coverage to purchase a qualified health plan through a Health Insurance Marketplace (“Marketplace”).   The notice is effective immediately and will appear in IRB 2014-41, to be published Oct. 6, 2014.

The notice addresses two specific situations in which a plan could allow an employee to revoke a cafeteria plan election (other than a health FSA election):  due to enrollment in the Marketplace; and due to a reduction in hours of service.  This should be a welcome relief to employers that may have been struggling with how to allow employees to change coverage from under the employer’s plan to a Marketplace or other group health plan.

At issue in Halbig v. Burwell and King v. Burwell is whether or not subsidies to buy insurance on an exchange are available in both state and federal exchanges.  On its face the Affordable Care Act (“ACA”) provides for subsidies only in state exchanges.  The Treasury Department wrote regulations in 2012, however, confirming that…