Employers may recall that one of the key provisions of PPACA was to apply the Section 105 non-discrimination rules to insured health plans. Starting in 2014, employers could not discriminate in favor of highly-compensated individuals when offering health insurance coverage. However, the rules relating to non-discrimination have yet to be written and IRS Notice 2011-1 specifically provides that the non-discrimination rules would not apply until regulations are written.
Well, here we are in January of 2014 and no rules have yet been written. So what is an employer supposed to do? According to the New York Times, the Obama administration is delaying enforcement of the non-discrimination provision because, as was the case in 2011, the rules have not yet been written. According to the Times, Bruce I. Friedland, a spokesman for the IRS, said employers would not have to comply until the agency issued regulations or other guidance.
One of the key questions facing the IRS is how to apply the non-discrimination rules if an employer offers the same coverage to all employees but large numbers of low-paid workers turn down the offer and instead obtain coverage from other sources, like a health insurance exchange. In other words, the employer does not intend to discriminate, but ends up with only a few highly compensated employees electing the plan. Plus, there is a question about whether to revise the existing non-discrimination rules for self-funded plans that have been in effect for years. In short, the same questions that existed in 2010 when the Act was passed exist today, and until regulations are written, enforcement remains impossible.
The long and short of it is that employers remain in limbo and, while they should try to offer coverage in a non-discriminatory fashion, until there are actual rules written the best we can rely on is our good faith efforts. As I have previously noted, the $100 a day penalty for non-compliance would be a real problem for employers if they start trying to enforce this provision without written rules so it will be a relief if the White House and IRS make this official and further suspend enforcement.