Control groups for benefit plans – Are you included?

Historically, employers have been able to provide different levels of medical benefits to their employees without much regard for what other companies in the same control group offered. The onset of PPACA, however, has caused employers to reexamine how benefits are handled in their control groups in order to ensure they are in compliance with the new regulations. Many have found it more efficient to partner with other control groups, a process determined by underwriting rules based on a percentage of shared ownership.  For purposes of PPACA’s employer mandate, there are three types of control group situations in which several companies can partner together and are therefore considered one employer. Doing so requires them to include all employees within the control group in the 50 (or 100) employee count threshold.

Below is a brief description of each option:

• Parent-Subsidy Groups – One or more businesses connected through stock ownership with a common parent.
• Brother-Sister Groups – Groups of two or more corporations, where five or fewer common owners directly or indirectly own a “controlling interest” of each group and have “effective control”.
• Combined Groups– A group consisting of three or more organizations, where each organization is a member of either a parent-subsidiary or brother-sister group, AND at least one corporation is the common parent of a parent-subsidiary, and is also a member of a brother-sister group.

For employers assessing whether or not the employer mandate applies to their organization, it’s critical to be clear on whether or not their company exists as part of a control group. The answer to this question not only triggers an offer of coverage responsibility, but can also trigger reporting requirements under Sections 6055 and 6056 of the Internal Revenue Code.

The policies behind the control group rules are complex, and employers should consult legal advisors as they review these regulations. This is especially true for those relying on the small employer exemption for many of the PPACA requirements. We encourage you to talk to your WGA Employee Benefits team members for more guidance and answers about control group specifications.

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About the Author

Kathleen McSherry is a Senior Vice President at William Gallagher Associates in the Employee Benefit Group with a core focus on compliance and communications. Her responsibilities include educating clients on applicable local, state and federal regulations affecting their insurance programs and employees. She also acts as a liaison between WGA’s ERISA attorney and the entire benefits department.

617.646.0359 | kmcsherry@wgains.com | Connect with Kathleen on LinkedIn