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IRS Delays Nondiscrimination Rules For Insured Health Plans

Release Date: December 23, 2010

For a printable copy of this alert, click here.

The Internal Revenue Service announced on December 22, 2010 that insured group health plans will not be required to comply with the new nondiscrimination rules under the health care reform law until the IRS issues further guidance. The new rules were scheduled to take effect for plan years beginning on or after September 23, 2010.

Background

The Patient Protection and Affordable Care Act included provisions[1] which impose significant excise taxes and other penalties on sponsors of insured group health plans that discriminate in favor of highly compensated individuals. This is the first time that insured health plans have been subjected to nondiscrimination requirements; self-insured plans have had to comply with the nondiscrimination rules under section 105(h) of the Internal Revenue Code for many years. The Affordable Care Act states that insured plans must not discriminate in favor of highly compensated individuals and that the existence of prohibited discrimination is to be determined in accordance with rules "similar to" the section 105(h) rules. 

The new nondiscrimination requirements for insured plans were scheduled to take effect for plan years beginning on or after September 23, 2010. However, no guidance on the new requirements has yet been issued. 

IRS Announces Delay of New Nondiscrimination Requirements

In Notice 2011-1, dated December 22, 2010, the IRS announced that compliance with the  new nondiscrimination requirements is not required "until after regulations or other administrative guidance of general applicability has been issued". The Notice states that the Departments of Labor and Health and Human Services agree with the delay of the new requirements, and that no penalties will apply until after regulatory guidance is issued. The Notice also states that the agencies anticipate that the new requirements will not apply until plan years beginning a specified period after the release of the regulatory guidance.   

The Notice requests comments on thirteen specific areas that the IRS believes need to be resolved. Comments are due by March 11, 2011.

If you have any questions on the new nondiscrimination requirements, Notice 2011-1, or any other aspect of health care reform, please contact Robert W. Patterson at 716.843.3910 or rpatterson@jaeckle.com, or Michele O. Heffernan at 716.843.3850 or mheffernan@jaeckle.com.

Jaeckle Fleischmann & Mugel has posted a number of Alerts on the health care reform law in a special section of its website: http://jaeckle.com/HealthCareReform.

IRS Notice 2011-1 can be found here: http://benefitslink.com/IRS/notice2011-01.pdf.


[1] Section 2716 of the Public Health Service Act, which is incorporated into Section 9815 of the Internal Revenue Code and Section 715 of ERISA.

This Jaeckle Alert, prepared by the employee benefits and health care attorneys at Jaeckle Fleischmann & Mugel, LLP, is intended for general information purposes only and should not be considered legal advice or an opinion on specific facts. For more information on these issues, contact one of the attorneys listed above or your existing Firm contact. Prior results do not guarantee a similar outcome. The invitation to contact is not a solicitation for legal work in any jurisdiction in which the contacted attorney is not admitted to practice. Any attorney/client relationship must be confirmed in writing. ã 2010. All Rights Reserved.  Buffalo, NY.