Non-Discrimination Rules

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When the IRS finally write the 105(h) non-discrimination rules, carve-outs will go away for good.

Overview

Section 10101(d) of the Affordable Care Act adds § 2716 to the PHS Act. PHS Act § 2716 provides that a group health plan (other than a self-insured plan) must satisfy the requirements of § 105(h)(2) of the Code and that “rules similar to the rules contained in paragraphs (3) [nondiscriminatory eligibility classification], (4) [nondiscriminatory benefits], and (8) [certain controlled groups]of § 105(h) of such Code shall apply.”

Section 2716 references the substantive nondiscrimination requirements of § 105(h) of the Code and applies them to insured group health plans. If an insured group health plan fails to comply with § 2716, the plan or plan sponsor may be subject to an excise tax of up to $100 per day per employee, a civil money penalty, or a civil action to compel it to provide nondiscriminatory benefits.

The Departments have determined that compliance with § 2716 should not be required (and thus, any sanctions for failure to comply do not apply) until after regulations or other administrative guidance of general applicability has been issued under § 2716, and those have not yet been issued.

Source: IRS Notice 2011-1

Regulations and Guidance

IRS Notice 2011-1
This notice addresses the timing of the application of the Affordable Care Act provisions prohibiting insured group health plans from discriminating in favor of highly compensated individuals.

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