105(h) Nondiscrimination testing of governmental plans

[Guest auntkk]

Does anyone have thoughts about how to advise a non-federal governmental plan sponsor who has recently converted from a fully-insured to a self-funded health plan with respect to nondiscrimination testing under 105(h). Initially, my thoughts were that because there is no explicit exemption from 105(h) for governmental plans (unlike in the qualified retirement plan context where governmental plans are exempt from 410(b)), self-funded governmental plans need to be tested.

But I recently spoke to someone who does nondiscrimination testing for one of the large benefits consulting firms and he said they don't really have governmental clients that they do the testing for and he may never have seen it. He doesn't think that 105(h) nondiscrimination testing is on the radar of governmental employers and he thoughts were to maybe hold testing a self-funded governmental plan at this point because: (1) no guidance has been issued for testing fully insured plans under PPACA yet and governmental plans (fully-insured and self-funded) might be exempt entirely, and (2) there has been little to no enforcement of 105(h) for self-funded plans and the Service won't start with a governmental plan.

Any thoughts? Has anyone heard anything about governmental plans being exempt from nondiscrimination testing when the guidance is issued?