Federal agencies have decided that the new Affordable Care Act group health nondiscrimination rules are too complicated for taxpayers to apply without regulatory guidance.
Taxpayers can wait to comply with the rules until the agencies come out with regulations or some other type of guidance, officials at the Internal Revenue Service (IRS) say in IRS Notice 2011-01.
The rules are supposed to discourage employers from using health plans that offer richer benefits to high-paid individuals than to other individuals.
Section 10101(d) of the Patient Protection and Affordable Care Act (PPACA), a component of the Affordable Care Act package, created the nondiscrimination rules by adding Section 9815(a)(1) to the Internal Revenue Code and Section 715(a)(1) to the Employee Retirement Income Security Act.
A non-grandfathered insured group health plan that fails to comply with the rules could be subject to an excise tax of $100 for each day of noncompliance per individual, officials say.
A non-grandfathered self-insured plan that fails to comply could lose tax benefits.
The IRS asked for comments on the nondiscrimination rules in a notice issued in September.
“Comments raised fundamental concerns about plan sponsors’ ability to comply with [the rules] without regulatory guidance,” officials say
Commenters were especially confused by a subsections that suggests that taxpayers should use rules similar to the rules used to interpret Internal Revenue Code Section 105(h) when applying the new rules, officials say.
Because regulatory guidance is essential to the operation of the statutory provisions, the well as the Departments of Labor, Treasury and Health and Human Services have decided not to require compliance with the rules until after regulations or other administrative guidance of general applicability has been issued, officials say.
Regulators are asking commenters to help it comment on a variety of isssues related to implementation of the rules, such as a suggestion that the nondiscrimination standards should be applied separately to employers sponsoring insured group health plans in distinct geographic locations and a suggestion that the departments should provide for “safe harbor” plan designs.
Comments are due March 11, 2011.