Agencies Delay Applicability and Enforcement Of Fully Insured Nondiscrimination Requirement

The IRS has delayed the application and enforcement of the additional nondiscrimination requirements for non-grandfathered FULLY INSURED plans that are required under the Affordable Care Act. This notice only impacts fully insured plans. Self-insured plans continue to be subject to the Code's nondiscrimination requirements and penalties.

IRS Notice 2011-1, available at www.irs.gov/pub/irs-drop/n-11-01.pdf states 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." This means:

• No excise tax under the Code §4980D ($100 per day per person discriminated against);
• No Form 8928 self-reporting of excise tax due to nondiscrimination failure;
• No civil penalties; and
• No civil action to enjoin noncompliant conduct or seek other equitable relief.

According to Notice 2011-1, compliance with the new nondiscrimination requirements will be prospective after regulations or other guidance is issued.

The agencies received many comments and questions regarding application and implementation of these new rules. The agencies are now requesting additional comments on the problems associated with implementing the statutory mandate. The comment period is open until March 11, 2011. We are grateful the agencies are showing genuine concern for employers difficulties implementing these changes so quickly with no guidance. If you have any questions, please contact BPC at 217-355-2300 or 800-355-2350.