Have you heard what didn’t happen? The IRS didn’t issue nondiscrimination rules for insured health plans. This non-development represents good news for January 1 plan year groups, because the IRS failure to publish rules means that such groups will not be subject to discrimination rules in 2017. So, we expect an effective date in 2018 at the earliest.

HUB International will continue to monitor the status of these nondiscrimination rules. Failure to comply after the rules take effect may result in penalties of $100 per day. (In contrast, if a self-funded plan – grandfathered or not – fails to comply with current rules, then claims paid for highly-compensated employees are taxable.)   

For a review of HUB International’s analysis of this provision, see our article from last June at: http://www.hubinternational.com/employee-benefits/legislative-regulatory-compliance/insured-health-plan-discrimination-rules-not-issued/

Next Steps

When the insured health plan nondiscrimination rules eventually are released, employers may need to revisit some decisions relating to:

  •  Plan changes to come into compliance for non-grandfathered plan options, such as eligibility terms, plan design, and employer and employee contributions.

  • Maintenance of grandfathered status to preserve executive / management medical programs (grandfathered plans only).

  • The issuing of a Summary of Material Modification – within 60 days after any plan changes are adopted – for changes that are considered a “material reduction in covered services or benefits provided under the plan” (but employers really should notify employees of these important changes in advance).

  • Increases in taxable salaries of the highly compensated to adjust for any benefit take-away.
  • Formal testing of insured plans for discrimination.

For more information please see:  http:/www.irs.gov/pub/irs-drop/n-11-01.pdf



The information herein is intended to be educational only and is based on information that is generally available.  HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.