There has been a lot of government guidance lately; we thought we would summarize just a few items in this ALERT as well as remind you of some action you might have to take soon!
Plans that obtained waiver of annual limit rules – February 7, 2011 deadline for certain plans.
As a condition of receiving a waiver from the annual limit requirements under Health Care Reform, a group health plan must provide a notice to eligible participants. OCIIO guidance 2010-1B issued last December provides a sample notice with the requirement that it be displayed “in clear, conspicuous 14 point bold type on the front of materials”. For plans that have already been approved for a waiver for plan years beginning before February 1, 2011 or that will receive approvals for plan years that begin before February 1, 2011, the notice must be provided by February 7, 2011. For plan years beginning on or after February 1, 2011, the notice must be provided to eligible participants as part of any informational or educational materials and also in any plan documents evidence coverage that is sent to enrollees such as enrollment material or summary plan descriptions.
Creditable Coverage Disclosure to CMS – March 1, 2011 deadline for certain calendar year plans.
If your plan provides prescription drug coverage, you must provide your Part D eligible employees a notice regarding creditable or non-creditable status of the coverage before the Medicare Part D annual enrollment period. In addition, you must disclose to CMS whether the prescription drug coverage that is offered to a Medicare Part D eligible individual is creditable or non-creditable no later than 60 days after the beginning of each plan year or March 1, 2011 for calendar years.
Nondiscrimination Testing Postponed
Nondiscrimination testing under IRC§105(h) for self-insured plans has been required for over 20 years. To this day, it is not clear how to apply the rules and much guidance is needed. Health Care Reform required nondiscrimination testing for non-grandfathered insured plans effective with the first plan year beginning on or after September 23, 2010 or January 1, 2011 for calendar year plans. The legislation indicated that insured plans must satisfy rules similar to the rules applicable to self-insured plans with different penalties for failure to satisfy the tests. The IRS issued Notice 2010-63 requesting comments concerning the application of the rules. As noted previously, the nondiscrimination rules for self-insured plans have been in need of guidance and the application of unclear rules to insured plans requires even more detailed guidance. In recognition of the need for clarity and in response to public comments, the IRS issued Notice 2011-1 which postpones the application of the nondiscrimination rules to insured plans until “regulations or other administrative guidance” is issued. In addition, the Notice provides that the guidance will not be effective until a specified period after issuance. The government requested additional guidance and listed 13 questions including:
- The use of the §414(q) highly compensated definition (currently used for 401(k) plans and dependent care plans)
- What constitutes nondiscriminatory benefits under §105(h)(5),e.g., is the duration of an eligibility waiting period treated as a “benefit” that must be provided in a nondiscriminatory manner?
- How do you apply the rules in 2014 when health insurance exchanges and other requirements become operational?
- Whether coverage provided to a “highly compensated individual” on after tax basis should be disregarded in testing?
- The treatment of employees who waive coverage
- Transition rules following a merger, acquisition or other corporate transaction
Comment
The postponement of the nondiscrimination rules signals the government’s appreciation of the convoluted current rules. Let’s hope that any guidance that is developed regarding the insured plans will
- provide clarification for self insured plans,
- provide a uniform definition of highly compensated employee
- define the word “benefits”
- recognize the business reasons for having different waiting periods for different groups of employees (hourly vs salaried) and
- above all be understandable, workable and make sense!
Note: all links are active as of the date of issuance of this ErisaALERT.
Disclaimer: This material is for the sole purpose of providing general information and does not under any circumstances constitute legal advice and should not be used as a substitute for legal advice. You should seek the advice of counsel when applying the requirements to your plan. For more information on this ErisaALERT contact us by phone at 610-524-5351 and ask for Mary Andersen or 973-994-7539 and ask for Theresa Borzelli.
