UPS to Cut Spousal Coverage

UPS recently sent a memo to their employees informing them that they will be cutting spousal coverage. They cite the Affordable Care Act as the impetus for change in their coverage. This is largely related to the “Play or Pay” tax of the law. Under the “Play or Pay” tax, employers are required to offer coverage to at least 95% of their full-time employees and their dependents. Detailed regulations clarify that “dependents” means children only, and does not include spouses. This means that as long as employers offer an employee-only plan and an employee plus children plan, they would be in compliance with the regulations, and thus avoid tax liability. This is one strategy that an employer can take to comply with regulations, but also cut costs. It will be interesting to see if UPS’s major competitors will follow suit. I believe that we will see trends start to break out by industry when it comes to new coverage options. This is just a sign of what’s to come, so keep your eyes open!