Health Care Reform: Does a Plan Year Change Work?

[Guest StainedGlass]

I read the following article, which suggests that the pay or play mandate can be put off for almost a year if insured employers change their plan year.

http://www.huffingtonpost.com/2013/04/04/aetna-obamacare_n_3009589.html?utm_hp_ref=business

It’s my understanding, based on the January 2 proposed regs, that a plan couldn’t switch from a calendar plan year to another plan year and avoid the pay or play mandate; only plans that had non-calendar plan years as of December 27, 2012 were grandfathered in. I’m trying to figure out if I’m missing something. Has anyone else encountered this? Do you have any thoughts?

[leevena]

Treasury released guidance on this a few months ago and does allow for groups to change their dates to delay. It is called "Transitional Relief for Non-1/1 Effective Date Plans." Hope this helps.

[Flyboyjohn]

Leevena can you provide a cite to the relief you mention? Thanks

[leevena]

See question 18

http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act

[Peter Gulia]

What ordering rules apply concerning an employer that maintains a health plan that has never specified a plan year?

(The plan I'm thinking has fewer than 100 participants, and never has filed a Form 5500 report. Also, the plan doesn't measure coverage by annual periods.)

[leevena]

Plan year is the effective date. Did I understand your question correctly?

[Flyboyjohn]

Aetna is proposing changing to a 11/30 FYE to delay implementation of the substantive provisions that increase premiums as long as possible

They are NOT speficially saying that such a change will delay the effective date of the 4980H mandate and penalties and I don't think the Transition Relief for fiscal year plans that existed on 12/27/12 would permit a fiscal year plan to change to a new 11/30 FYE now

[Guest registered user]

No, A plan year change at this time will not work for employer shared responsibility, and really if you reread the Huffington Post article, employer shared responsibility is correctly NOT listed as one of the mandates that can be avoided. However, it may work for some of the other mandates that take effect on plan years beginning on or after 2014.

IRS did allow some transitional relief on employer shared resposibility for fiscal year plans (i.e. non calendar year plans), but the transitional relief is only available to the plans that already had a fiscal plan year prior to 12/27/2012. That’s the date the proposed regulation was published

78FR236, Jan. 2 2013: If an applicable large employer member maintains a fiscal year plan as of December 27, 2012, the relief applies with respect to employees of the applicable large employer member (whenever hired) who would be eligible for coverage , as of the first day of the first fiscal year of that plan that begins in 2014 (the 2014 plan year) under the eligibility terms of the plan as in effect on December 27, 2012. If an employee described in the preceding sentence is offered affordable, minimum value coverage no later than the first day of the 2014 plan year, no section 4980H assessable payment will be due with respect to that employee for the period prior to the first day of the 2014 plan year.

It’s the other insurance reforms that will be the big cost driver for some employers, most notably community rating. And that does apply for plan years on or after Jan 1, with no specific reference similar to the above to freeze out plan year changes. So what’s a plan year? The Definition is below. So if an employer has no plan document, but has a calendar year deductible, the mandates would be effective Jan 1. But all of the news articles about Aetna and others fail to explain how changing the renewal year accomplishes a delay in the changes. Perhaps Aetna is also providing or requiring some other documentation to the employers who choose to adopt this strategy.

45CFR 144.103: Plan year means the year that is designated as the plan year in the plan document of a group health plan, except that if the plan document does not designate a plan year or if there is no plan document, the plan year is—

(1) The deductible or limit year used under the plan;

(2) If the plan does not impose deductibles or limits on a yearly basis, then the plan year is the policy year;

(3) If the plan does not impose deductibles or limits on a yearly basis, and either the plan is not insured or the insurance policy is not renewed on an annual basis, then the plan year is the employer's taxable year; or

(4) In any other case, the plan year is the calendar year.

[GBurns]

No, changing will not help.

If the excellent explanation given by registered user is not enough, this simple explanation from Bryan Cave should be:

http://benefitsbryancave.com/renew-early-pay-later/