Guest Article

(From the January 18, 2011 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

IRS Asks for More Comments on Applying Code § 105(h) to Insured Group Health Plans

Beyond an extended compliance date, Notice 2011-1 provides some insight on where the IRS may be headed in applying the Code § 105(h) nondiscrimination requirements to insured group health plans. New specific areas are identified for public comment.

Compliance Date Is Extended

We reported earlier on Notice 2011-1, which postpones the time by which insured group health plans must comply with the nondiscrimination requirements of Code § 105(h). Although the nondiscrimination requirement is effective for plan years beginning on and after September 23, 2010, the Notice states that the enforcement agencies will not require compliance (i.e., will not impose sanctions for failure to comply) until after guidance is issued. Moreover, to provide time to comply, the Notice indicates that the guidance will not be effective until plan years that begin a specified period of time after the guidance is issued.

The Notice was released after the enforcement agencies requested and received comments from the public regarding the application of Code § 105(h) to insured group health plans. Following a review of the comments, the agencies were concerned that plan sponsors would not be able to comply in the absence of regulatory guidance. Key among the concerns was the fact that the changes, which are mandated by the Patient Protection and Affordable Care Act (PPACA), call for insured group health plans (other than grandfathered plans) to comply with rules similar to those that apply to self-insured plans under Code § 105(h) - leaving open the question of the areas in which insured plans would be subject to a different but similar application of the Code § 105(h) rules. Also a concern was the request for guidance regarding the application of the Code § 105(h) requirements to two distinct periods: plan years beginning in 2014 and later (i.e., after the PPACA effective date for the State Exchanges, employer responsibility, etc.), and before.

Request for Comment on New Suggestions on How to Comply

Beyond the extended compliance date, Notice 2011-1 requests comments on certain new suggestions that were made regarding how the Code § 105(h) requirements may apply. Among other matters, the Notice requested comments on:

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.220.2692, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2011, Deloitte.