Delay for Nondiscrimination Provisions Applicable to Insured Group Health Plans
On December 22, 2010 , the IRS issued Notice 2011-1, which essentially delays compliance with the provisions of the PPACA prohibiting fully insured group health plans from discriminating in favor of highly compensated individuals. The nondiscrimination provisions under the PPACA require non-grandfathered fully insured plans to comply with rules “similar” to the rules applicable to self-insured plans. The effective date of the nondiscrimination provisions was scheduled for the first plan year beginning on or after September 23, 2010 and has already affected renewal considerations for plans that renewed in late 2010 or for January.
As you know, this provision raised many concerns about the ability of plan sponsors to comply with these provisions without regulatory guidance. In response to comments from the benefit community, the IRS, Treasury Department and Departments of Labor and Health and Human Services have determined that compliance with the nondiscrimination provision should not be required (and any sanctions for failure to comply do not apply) until after regulations or other administrative guidance has been issued. Such guidance will not apply until plan years beginning a specified period after issuance.
The Departments have requested further comments on a variety of issues by March 11, 2011; thus, we cannot expect guidance in the near future. We will keep you apprised of any further developments, but for the time being, it appears that no changes will be required for the coming year.