Last week the IRS announced (IRS Notice 2011-1 issued on December 22) that they will not require plan sponsors of insured group health plans to satisfy PPACA’s nondiscrimination testing provisions under IRC Sec. 105(h) until after the IRS, in conjunction with the Departments of Labor and Health & Human Services, issues further guidance. These nondiscrimination testing requirements were initially to be effective on January 1, 2011 for calendar-year group helath plans. According to the Notice, penalties for non-compliance will not be levied (generally, an excise tax on plan sponsors of $100 per day for each affected individual under a group health plan) until a specified period of time after the anticipated guidance is issued, nor will plan sponsor have to file Form 8928 with the IRS regarding excise taxes resulting from any period of non-compliance prior to the effective date of the yet-to-be-issued guidance. In the Notice, the IRS also requested additional public comments on specific aspects of PPACA’s nondiscrimination provisions. The deadline for submitting comments to the IRS is March 11, 2011. The Notice can be found at http://www/irs.gov/pub/irs-drop/n-11-01.pdf
Note that the IRC’s nondiscrimination rules under 105(h) will continue to apply to self-insured group health plans including grandfathered plans. The regulatory relief announced in the Notice only affects insured group health plans.