Insurance One Management, Inc.

Posts Tagged ‘Highly Compensated’

Addressing the timing of the application of the PPACA provisions prohibiting insured group health plans from discriminating in favor of highly compensated individuals:

In Health Care Reform on January 5, 2011 at 12:22 am

The Patient Protection and Affordable Care Act (PPACA) included a provision that prohibited non-grandfathered group health plans from offering coverage that discriminated in favor of highly compensated individuals. The IRS released Notice 2011-01 on December 23, 2010, which indicates the IRS, Department of Labor and the Department of Health and Human Services will not require compliance with this non-discrimination provision until these Departments are able to issue further regulations or other guidance on the topic.

– An article from TaxArticles.info

– IRS Notice 2011-1

– An article from Employee Benefit News

– IRS Temporarily Suspends Compliance With Non-Discrimination Rules

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Health Care Reform and Non-Grandfathered Group Health Plans favoring Highly Compensated Individuals:

In Health Care Reform on October 4, 2010 at 3:22 am

[PPACA: IRS May Extend Anti-Discrimination Rules]

[Health Plan Non-Discrimination Testing Guide for Fully Insured Plans]

The Patient Protection and Affordable Care Act (PPACA) was enacted on March 23, 2010. Many of the provisions of PPACA are effective for plan years beginning after September 23, 2010 while others aspects of the law will become effective over the next eight years. Under the PPACA, employers that have fully insured, non-grandfathered, group health insurance coverage for their employees are subject to significant penalties if they provide coverage that discriminates in favor of highly compensated individuals. Plans in effect as of March 23, 2010 may be considered by the law to be “grandfathered.”

As stated in Section 2716 of the Patient Protection and Affordable Care Act (PPACA), effective for plan years beginning on or after Sept. 23, 2010, the nondiscrimination rules of IRC Section 105(h) will now apply to fully insured, non-grandfathered, group health plans. For purposes of PPACA, a discriminatory insured group health plan is defined as one that fails to satisfy the requirements of section 105(h)(2) relating to discrimination in favor of highly compensated individuals. These plans are sometimes also known as “carve-outs.”

The group health coverage that you provide your employees might be considered discriminatory if, for example, you provide health insurance only to a select group of management employees or if you provide better health insurance to management employees than you provide to other employees. These are only illustrations. In general, you can only tell if your coverage is discriminatory by applying certain numerical and subjective tests that are set out in federal income tax regulations. If you are uncertain whether your coverage is discriminatory, you should check with your tax counsel or accountant. It’s important for you to know this because your group health insurance policy with your current fully insured health carrier will mostly likely be changing to a non-grandfathered plan design very soon. This means that if the group health coverage you provide your employees does discriminate in favor of highly compensated individuals, your company may have to pay substantial penalties.

Your group health insurance carrier cannot and will not determine whether your group health coverage is discriminatory, and will not accept liability for penalties and other losses that might result if your offer discriminatory group health coverage. If you determine that your group health insurance plan does discriminate in favor of highly compensated individuals, contact your agent and/or insurance carrier for further details and to discuss suitable alternatives.