Published January 2011
The Internal Revenue Service has announced that they will be delaying the enforcement of the new nondiscrimination provisions applicable to insured group health plans.
The Health Care Reform Law requires non-grandfathered insured group health plans to satisfy the requirements of Internal Revenue Code Section 105(h)(2), previously applicable only to self-funded group health plans. However, the revised law prohibits non-grandfathered insured group health plans from favoring highly compensated individuals with respect to eligibility or benefits. The Health Care Reform Law would require sponsors of noncompliant plans to pay a bulky excise tax of $100 per day per affected individual, effective at the start of the 2011 plan year.
The recent notice issued by the IRS delaying these provisions will provide relief from these excise taxes. The IRS has determined that the provisions will not be required until after regulations or other administrative guidance of general applicability have been issued. They are also predicting that once the regulations are issued, they will not apply until the plan years beginning some period of time thereafter.