Affordable Care Act Avoidance Scheme: If It Looks Too Good To Be True …

A questionable ACA avoidance scheme has recently come to my attention. The scheme purports to significantly reduce costs associated with ACA compliance by using a so-called Medical Expense Reimbursement Plan or “MERP.” Under this scheme, employers are encouraged to drop health coverage for their employees and adopt a MERP through which the employer helps to fund the employees’ purchase of individual health insurance on the exchange. The scheme has been presented by legitimate-looking organizations as being compliant with the law and is accompanied by a “legal opinion.” We strongly recommend consulting with counsel before adopting such a scheme. It directly contradicts the IRS position on MERPs and puts the employer at high risk for employer mandate penalties.

If you have any questions about this alert, or other employee benefits matters, please contact Steve Gerlach at 207 774-1200 in ME, 603 623-8700 in New Hampshire or sgerlach@bernsteinshur.com. Steve is a Chambers rated ERISA attorney and a member of Bernstein Shur’s Labor & Employment Practice Group. He represents businesses and nonprofit employers in matters of executive compensation, employee benefits, the Affordable Care Act and ERISA.