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Treasury Rescinds its Position on “Cash-in-Lieu” Payments


June 27th, 2013

     On May 13, 2013, we sent to our retainer clients an e-blast about the Michigan Department of Treasury’s position on “cash-inlieu” of health insurance payments under Public Act 152 of 2011. At that time, Treasury opined in a published “Frequently Asked Questions” document that public employers had to include “cash-inlieu” payments in calculating the maximum employer contribution to a public employee’s health care costs under both the “hard cap” and the “80/20” provisions of PA 152.

Treasury’s novel position on “cash-in-lieu” payments was unanticipated and presented significant challenges for public employers seeking to comply with PA 152. On June 13, 2013, Treasury rescinded its position by issuing a revised “Frequently Asked Questions” document. The revised guidance states, “a public employer does not need to include in [its] total annual benefit plan amount any stipend it pays to employees. . . who choose to opt out of taking health insurance.” School officials should be aware that employees who opt out of health insurance coverage in favor of “cash-in-lieu” payments cannot be counted toward the district’s overall “hard cap” limit on employer contributions to employee health care costs. Treasury’s revised interpretation appears consistent with the statutory language it interprets.