Feds delay enforcement of health plan nondiscrimination rules

Good news for health plan sponsors: The feds have announced that the nondiscrimination rules pertaining to non-grandfathered plans aren’t going to be enforced until more guidance is issued on the requirements.
The Internal Revenue Service, the Department of Labor and the Department of Health and Human Services just released a notice saying that they are delaying the date insured health plans will have to comply with the nondiscrimination rules that were part of the health reform law.
The rules were issued to prohibit insured group health plans from discriminating in favor of highly compensated individuals. Originally the rules only affected self-funded plans, and then the feds decided to cast a wider net — mandating that all insured plans conform to the requirements.
Potentially discriminatory plans
Under the proposed rules, any healthcare benefits for current or former executives (top 25 percentile by pay) that isn’t offered to non-executives are prohibited.
Three examples of potentially discriminatory healthcare coverage:

  1. As a recruiting tool, a company begins healthcare coverage for the CFO on his or first day of his/her employment. However, for all other employees, healthcare coverage doesn’t kick in until after the first 60 days of employment.
  2. All new salaried employees are eligible for healthcare benefits immediately, but hourly workers are not eligible until 90 days after their start date.
  3. A company gives a manager a severance agreement that will pay for all or a portion of his COBRA premiums for a full 12 months if his employment is involuntarily terminated — and all other former workers are required to pay the full COBRA premiums themselves.

Indefinite delay
The IRS and other agencies have said that compliance with the reform law’s nondiscrimination rules will not be required until the agencies have issued regulations or other guidance regarding the rules. However, no timetable was announced as to when such guidance might be released.
But the agencies did say that when the guidance is issued, the effective date for the rules will be delayed to give plan sponsors time to implement the changes that’ll be required.
Spurring the delay in enforcement were plan sponsors’ concerns about their ability to comply with the rules without further guidance.
The rules were originally scheduled to take effect on Jan. 1, 2011 for calendar-year plans. So the announcement of the delay comes too late for plan sponsors that have already changed their plans to comply with the requirements. The bright side: Those sponsors will probably have little left to do to get their plans in compliance once the new guidance is issued.