Benefits & ERISA Law

Sometimes Late is Better Than Never

By Suzanne Wynn

Today, the IRS issued two Notices providing some more guidance about the Affordable Care Act.

In Notice 2011-1, the IRS delayed that compliance with section 2716 of the Public Health Service Act Act is not required until after regulations or other administrative guidance is issued under section 2716. Section 10101(d) of the Affordable Care Act adds section 2716 to the Public Health Service Act. It provides that a group health plan (other than a self-insured plan) must satisfy the nondiscriminatory requirements of Internal Revenue Code section 105(h). An insured group health plan that fails to comply with these rules can be subject to an excise tax of $100 for each day the plan fails to comply with respect to each individual to whom such failure relates, which is a fairly substantial penalty that can start to add up quickly for a noncompliant plan.

In Notice 2011-1, the IRS states that it was the actual language which caused the stumbling block in implementing this provision of the Affordable Care Act, and which ultimately has caused this delay. The language at issue causing the delay is:

“rules similar to the rules contained in paragraphs (3), (4) and (8) of section 105(h) of such Code shall apply to insured plans.”

The IRS explains that:

“The section 2716(b)(1) reference to rules ‘similar to’ means that guidance must specify in what respects insured plans are subject to the same statutory provisions that apply to self-insured plans under section 105(h)(3), (4) and (8) and in what respects insured plans are subject to rules reflecting a different (although ‘similar’) application of those statutory provisions.”

At the end of Notice 2011-1, there are a number of items that the IRS is requesting comments on, so it is worth reading all the way to the end on this one.

Also issued today was Notice 2011-2. It provides guidance on the application of new Internal Revenue Code section 162(m)(6), which limits the allowable deduction for remuneration for services provided by individuals to certain health insurance providers. Section 162 was added to the Internal Revenue Code by section 9014 of the Patient Protection and Affordable Care Act (Pub. L. 111-148).

Full post as published by Pension Protection Act Blog on December 23, 2010 (boomark / email).