Delay for Nondiscrimination Provisions Applicable to Insured Group Health Plans

On December 22, 2010, the IRS issued Notice 2011-1, which essentially delays compliance with the provisions of the Patient Protection and Affordable Care Act (PPACA) prohibiting fully insured group health plans from discriminating in favor of highly compensated individuals. The nondiscrimination provisions under the PPACA require non-grandfathered fully insured plans to comply with rules "similar" to the rules applicable to self-insured plans. The effective date of the nondiscrimination provisions was scheduled for your plan's anniversary beginning on or after September 23, 2010.

This provision has raised concerns about the ability of plan sponsors to comply with these provisions without regulatory guidance. In response to comments from the benefit community, the IRS, Treasury Department and Departments of Labor and Health and Human Services have determined that compliance with the nondiscrimination provision should not be required (and any sanctions for failure to comply do not apply) until after regulations or other administrative guidance has been issued. Such guidance will not apply until plan years beginning a specified period after issuance.

The Departments have requested further comments on a variety of issues by March 11, 2011; thus, we can not expect guidance in the near future. We will keep you apprised of any further developments, but for the time being, it appears that no changes will be required for the coming year.

As always, Long Island Planning Group, Ltd.'s goal is to keep you informed of the facts and the effects on you and your business.

*Information received from Emerson Reid