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Non-Discrimination For Group Health Insurance


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Just read a summary of the health care bill that states that Sec. 10105 and 10101(d) of the Affordable Care Act involves new nondiscrimination rules for insured plans. Does this mean that all companies that offer health insurance, must follow basically the same nondiscrimination rules for pension plans? Is there an exclusion for small companies under 25 ee's?

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Guest JWB19
Just read a summary of the health care bill that states that Sec. 10105 and 10101(d) of the Affordable Care Act involves new nondiscrimination rules for insured plans. Does this mean that all companies that offer health insurance, must follow basically the same nondiscrimination rules for pension plans? Is there an exclusion for small companies under 25 ee's?

I don't think you'll have to worry if you let employees pay for coverage through a 125 plan because that already has its own nondiscrimination requirements (thougnn not identical to 105). The point of this new provision in PPACA is to go after the fully-insured executive plans that essentially cover everything.

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  • 4 months later...
Guest PatriciaT

I have a related question about the application of 105(h)-type rules under PPACA: if an employer offers one fully-insured group health plan to all employees, and the eligibility rules are satisfied, does it violate the 105(h) rules as applied under PPACA (as to _benefits_) if the HCIs have their premium 100% paid by the employer? Same benefits under the health plan to all. No cafeteria rule implication b/c the HCIs don't have to contribute. Hard to translate the 105(h) reg's to fully-insured plans where "reimbursement" is used as a measure of "benefits". Thanks.

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Patricia, yes, that would be a violation.

I also don't think that just because Section 125 is satisfied that the group will pass these new regs. Example, company has 1 health plan. Rank and file eligible at 90 days, middle management at 60 days, upper management at 30 days. To make this pass in Section 125, all you have to do is not allow anyone to pretax until 90 days (contributions of other groups, if any, post tax until after 90 days). But these new regs will not allow you to have different waiting periods. Period.

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A discriminatory plan is not considered non-discriminatory because under Sec. 125 testing, the benefit passed non-discrimination.

Plans must pass non-discrimination under the specific IRS benefit code, for example non-discrimination rules for Group Term Life under Sec. 79 must be passed, and Sec. 125 testing for GTL if premiums are paid pre-tax.

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SLuskin: Why do you believe that what Patricia proposed would be a violation?

Patricia: We were just discussing the same sort of question in our office. Does the new PPACA nondiscrimination requirement (for insured arrangements) apply to benefits only or to the funding as well? To me, it seems strange that if the new rules were meant to impose nondiscrimination requirements with respect to funding, then why was 106 left alone?

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In the same vein, the question that came up today is this: LLC with 250 ees. 51 are LLC members. Identical benefits, identical waiting periods. LLC pays 100% for members, who then must impute this income. LLC pays 75% for all other employees, including upper management that are not members.

Does this pass?

If not, what sense would it make to have the LLC pay 75% of the member premiums and then have the member pay the other 25% and be grossed up for it?

This piece of it is really confusing for me.

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Guest PatriciaT
In the same vein, the question that came up today is this: LLC with 250 ees. 51 are LLC members. Identical benefits, identical waiting periods. LLC pays 100% for members, who then must impute this income. LLC pays 75% for all other employees, including upper management that are not members.

Does this pass?

If not, what sense would it make to have the LLC pay 75% of the member premiums and then have the member pay the other 25% and be grossed up for it?

This piece of it is really confusing for me.

For what it's worth, I sent my question in as a comment to the IRS request for same on this part of PPACA. The deadline for comments is early November.

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  • 2 weeks later...

Hey, what am I missing? If plan remains as it was on 3/23/2010, then non-discrimination rules do not apply because the plan is grandfathered. I'd try to go that route, to start with.

As a solution to fully-paid premiums for HCEs in a non-grandfathered plan, just gross them up so that they pay the full premium from their pockets.

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