The Employer Mandate and ERISA Section 510 – employers considering workforce reorganization must tread carefully

The Employer Mandate and ERISA Section 510

JUNE 25, 2013 – 3:00 PM

The Patient Protection and Affordable Care Act (PPACA) requires large employers – those with 50 or more full-time employees and full-time equivalents – to offer their full-time employees (those who work an average of 30 hours per week) the opportunity to enroll in coverage that is both affordable and provides minimum value or pay potential taxes/penalties for noncompliance. To avoid the employer mandate, some employers have considered reorganizing their workforces – for example, by reducing employees’ hours below 30 per week so that they are not considered full-time employees, or reducing their number of employees.

ACA and ERISA-FineLine


ERISA Section 510: No Interference with an Employee’s Present or Future Benefits
Section 510 of the Employee Retirement Income Security Act of 1974 (“ERISA”) prohibits discriminating against a plan participant or beneficiary with the purpose of interfering with the employee’s rights under the plan. This provision of ERISA protects both present and future benefit entitlements. Terminating, disciplining, or discriminating against an employee for exercising his or her rights under a plan would clearly be in violation of section 510. Section 510 of ERISA also protects participants from retaliation for giving information or testifying in an inquiry or proceeding relating to ERISA.

For purposes of the employer mandate, employers must be careful about any action that interferes with an employee’s attainment of any right that he or she may be entitled to under the plan. By adjusting an employee’s hours such that the employer does not need to offer coverage to the individual, the employer may be interfering with the employee’s attainment of benefits, thereby exposing itself to potential litigation under section 510 of ERISA.

Many decisions affect the right to benefits, so cases examining the issue have generally required plaintiffs to demonstrate that an employer acted with specific intent to interfere with benefits. In the context of the employer mandate, a plaintiff therefore would have to demonstrate that the employer acted with the intent to avoid providing benefits, and not for a legitimate business reason. These cases will depend heavily on the various facts and circumstances. Little clear-cut guidance has been issued on the interaction of the employer mandate with ERISA section 510, so employers considering workforce reorganization must tread carefully.

This area is still a little murky, but we will keep you posted on any developments. In the meantime, please visit to view past blogs and Legislative Alerts. Or, you may visit for blog posts, polls, surveys and numerous resources.

 The views expressed in this post do not necessarily reflect the official policy, position, or opinions of Be Well Insurance Solutions.This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.


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