SCA and ACA: How do They Overlap?

Is your company a federal contractor subject to the Service Contract Act (SCA)? An important consideration for SCA-covered employers is managing how fringe benefits are paid.

Many employers who perform work covered by the SCA opt to pay cash in lieu of benefits to their employees who decline coverage under the employer’s group health plan. This is an attractive option to some employers, because it may reduce the administrative time spent tracking benefits for each employee.

However, there is some question as to how this system overlaps with the Affordable Care Act (ACA). For instance, if you are paying cash in lieu of benefits to an employee pursuant to the SCA, are you permitted to take those benefits into account when determining if the offered coverage is “affordable” under the ACA? What if the employee has declined coverage and sought to obtain health insurance through the marketplace? The ACA requires that Applicable Large Employers offer affordable health care to their employees. If an employer is providing for health care by using cash in lieu of benefits only, are they in compliance with the ACA? What can they count as the amount that should be listed on the 1095-c? Also, is this method ensuring that employees get “affordable” health care under the ACA? So many questions, and not enough space for the answers.

Fortunately, MSEC can assist. If you are a federal contractor paying employees cash in lieu of health care benefits, we can help you ensure your arrangement complies with the ACA and the SCA. Please don’t hesitate to call.