Even though an employer that contributes to a multiemployer welfare benefit plan can generally make changes to the benefits offered under the plan only during collective bargaining negotiations, certain employers could potentially be exposed to audits and monetary penalties under the employer mandate of the Patient Protection and Affordable Care Act (“ACA”) if the plan to which they contribute does not comply with ACA requirements.

Although there has been little guidance relating specifically to multiemployer plans under the ACA, the Internal Revenue Service (“IRS”) recently issued proposed transition relief and subsequent corrections to the transition relief for employers contributing to multiemployer plans.  Under the revised transition relief issued on March 15, 2013, applicable large employers (i.e., employers with 50 or more full-time employees and full-time equivalents) meeting the following two requirements will not be subject to the ACA’s employer mandate penalty:

  1. The employer is required to make contributions for some or all of its employees to a multiemployer plan pursuant to a collective bargaining agreement; and
  2. The plan offers affordable coverage providing minimum value to individuals that satisfy the plan’s eligibility requirements and to their dependents.

Unfortunately, the revised transition relief is available only through 2014, and the plan must separately satisfy a 90-day waiting period limitation.  Given the lack of clarity as to how these rules will evolve starting in 2015, employers should consider including reopener provisions in their collective bargaining agreements to allow negotiations to occur before their scheduled date or to set aside funds to cover the potential penalty.  Alternatively, employers can join lobbying efforts to amend this part of the ACA.

As applicable large employers will be required to submit reports to the IRS on benefits provided, it would be prudent for employers to review these ACA and IRS rules closely.