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Compliance with ACA in M&A transaction


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A large employer is acquiring a small employer in a stock sale. Following the sale, the large employer is going to liquidate the small employer company and, thus, causing it assets and employees to merge into one of large employer's subsidiaries. Small employer has a group health insurance plan. Small employer wants to continue to offer that insured plan following the closing to its employees participating in such plan. The small employer plan provides more generous benefits than the large employer plan. The large employer is concerned that the small employer group health plan doesn't comply with the ACA requirements applicable to a large employer plan, including the minimum value requirements of a large employer plan. Are there any transitional rules (similar to 410(b)(6)©) that would allow the large employer to continue to provide only this coverage to those employees or must the large employer make an offer of coverage to these employees under its group health plan (and also allow these employees to elect to keep their current small plan) to avoid the $3,000 excise tax that would be incurred with respect to these employees?

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  • 3 weeks later...

No specific transition relief available.

Small Employer has no 2015 ACA penalty exposure or 1095-C reporting requirements for the months that it was the employer.

Former employees of Small Employer have become employees of Large Employer Subsidiary so unless Subsidiary amends it's current health plan document and contract it will need to offer the new full-time employees coverage under its existing plan pursuant to existing eligibility requirements and I'll presume that the existing coverage is affordable and meets minimum value.

So the question I think you're asking is could Subsidiary also adopt and offer the skinny plan previously offered by Small Employer as an alternative to the ACA compliant plan it already offers?

No problem from an ACA or ERISA perspective to offering more than 1 plan but I suspect the contract with the carrier handling the compliant plan will not permit a "competing" plan to coexist with it's offering.

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