The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (the “Act”) provides that nondiscrimination rules similar to those imposed on self-insured group health plans are to apply to insured group health plans. These rules generally were to become effective with respect to insured group health plans, other than “grandfathered plans,” for plan years beginning on or after September 23, 2010 (i.e., January 1, 2011 for calendar-year plans).

The Internal Revenue Service previously requested comments on these rules and, in Notice 2011-1 (scheduled to be published in Internal Revenue Bulletin 2011-2, dated January 10, 2011), has indicated that the comments that were received raised fundamental concerns about employers’ ability to comply with the requirements without regulatory guidance. (See our October 29, 2010 Legal Update, “Employers Subject to Harsh Penalties if Insured Group Health Plan Favors Highly Paid Employees.”) Accordingly, Notice 2011-1 provides that compliance with the rules is not required (and no sanctions for noncompliance will apply) until after regulations or other administrative guidance has been issued. In addition, the Notice states that it is anticipated that new guidance will not apply until plan years beginning after a specified time after the guidance is issued. Finally, the Notice solicits additional comments on the new rules.

For more information about the Act, Notice 2011-1, or any other matter addressed in this Legal Update, please contact Debra B. Hoffman at +1 312 701 7219, Wayne R. Luepker at +1 312 701 7197, or any other member of our Employment & Benefits and Executive Compensation practices.

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