Since the enactment of the Affordable Care Act (ACA), larger employers have wondered about an auto-enrollment provision that the ACA added to the Fair Labor Standards Act (FLSA). Under that provision, employers that are subject to the FLSA and which employed more than 200 full-time employees would have been required to automatically enroll new full-time employees in one of the employer’s health benefits plans (subject to any waiting period authorized by law). Certain notices would have been required giving employees an opportunity to opt out of any coverage in which the employee was automatically enrolled.

Employers have been in limbo about auto-enrollment since December 2010, when the Department of Labor advised in a Frequently Asked Question that because the statute requires implementation of the requirement “[i]n accordance with regulations promulgated by the Secretary [of Labor],” and no regulations had been issued, employers were not required to comply with FLSA section 18A until the DOL completed its rulemaking.

Wonder no more. Today, President Barack Obama signed H.R. 1314, the “Bipartisan Budget Act of 2015,” which among other things repealed the auto-enrollment requirement from the FLSA. For many employers, this will be welcomed relief from yet another ACA compliance requirement.

Note, however, employers may decide to use “default” or “negative” elections for enrolling employees into health plan coverage or certain other benefits. Under a default or negative enrollment arrangement, an otherwise eligible employee will be deemed to have elected a certain type and level of coverage, unless the employee timely returns a written waiver of that coverage. The Internal Revenue Service permitted this practice in a 2002 Revenue Ruling, and affirmed the approach in proposed regulations under Section 125, issued in 2007. This practice may even be applied to HSA contributions made under a cafeteria plan.

As many expected would be the case for the ACA’s auto-enrollment requirement, to implement default or negative elections under Section 125, employers would need to provide notice to employees about the coverage and cost, and provide the opportunity to opt-out of the arrangement. In many cases, negative or default elections will involve payroll deductions made without an affirmative election by the employee to reduce his or her wages to pay for that benefit. Some state wage withholding laws, however, have an express requirement that there be an affirmative election by the employee before any deductions may be made. But, the DOL has taken the position that in this context such wage withholding laws are preempted by ERISA. Still, employers may want to avoid the ire of an aggressive state labor official seeking to enforce his or her state’s wage law, even if the battle may be won by the employer in court.  Employers should consider this practice carefully and consult with appropriate counsel.