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DOL and IRS Explain Application of Key Rules to Association Health Plans

EBIA  

EBIA  

DOL, Association Health Plans: ERISA Compliance Assistance; IRS, Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act

DOL

IRS

The DOL and IRS have each issued guidance addressing rules applicable to association health plans (AHPs) under final regulations issued in June (see our Checkpoint article). The regulations are designed to expand the availability of AHPs by providing an additional basis for a group or association of employers to be treated as an “employer” sponsoring a single ERISA-covered multiple employer group health plan. A DOL compliance assistance publication summarizes key ERISA rules applicable to AHPs, and notes that other laws may also apply. Highlights include:

  • Disclosure Rules. The DOL characterizes summary plan descriptions, summaries of material modifications, and summaries of benefits and coverage as three of the most important disclosures, and includes a link to a separate Reporting and Disclosure Guide for Employee Benefit Plans.
  • Reporting Rules. AHPs, whether fully insured or self-insured, generally must file both a Form 5500 and a Form M-1 annually with the DOL. The publication observes that both forms are available on the DOL’s Reporting and Filing webpage and that filings for existing AHPs can be obtained from the searchable Form M-1 database.
  • Claims Administration. Noting that benefit determinations and claims procedures are subject to specific timing and other rules, the publication refers to FAQs about application of the ERISA benefit claims procedure regulation to group health and disability plans.
  • COBRA. After summarizing the basic requirements for COBRA continuation coverage—including inapplicability of COBRA to small employers (those with fewer than 20 employees), the DOL indicates that future guidance is anticipated on applicability of COBRA to small employers participating in AHPs. A link to an employer’s guide to COBRA is provided.
  • Consumer Health Protections. According to the publication, this category includes the requirements set forth in Part 7 of ERISA, such as HIPAA portability, the Affordable Care Act (ACA), mental health parity, and GINA, among others. Reference is made to the DOL’s separate compliance assistance guide describing these requirements.
  • Fiduciary Rules. The publication describes ERISA fiduciary duties and specifically mentions ERISA’s requirements for plan assets to be held in trust and for written plan documents (which, among other things, must name fiduciaries responsible for control and administration of the plan). The publication also indicates that employers participating in an AHP generally have a fiduciary duty to monitor the AHP and get periodic reports on management and administration of the AHP. Prohibited transactions—and possible statutory and administrative exemptions, such as the exemption for payments to plan service providers—are also addressed.
  • Voluntary Correction. The DOL notes that its Voluntary Fiduciary Correction Program (VFCP) and Delinquent Filer Voluntary Compliance Program are available to correct certain compliance failures. The publication suggests that the VFCP may be used to correct an employer’s failure to promptly send employee contributions to the AHP.
  • Enforcement. The DOL explains that its enforcement authority for multiple employer welfare arrangements (MEWAs) applies to AHPs. Enforcement may consist of cease-and-desist orders, orders to seize assets of MEWAs in a financially hazardous condition, and criminal penalties for false statements in the sale or marketing of MEWAs. The publication refers to the DOL’s MEWA guide for further information. The publication also notes that ERISA gives the states authority to regulate AHPs.

The publication concludes with a reminder that AHPs can elect to operate under either the final regulations or under previous DOL guidance, and summarizes applicability dates for AHPs established under the final regulations.

Separately, the IRS has updated its Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act with a new Q/A addressing AHPs. The new entry clarifies that an employer that is not an applicable large employer (ALE) for purposes of employer shared responsibility under health care reform does not become an ALE solely due to participation in an AHP, and an ALE continues to be subject to employer shared responsibility regardless of its participation in an AHP. According to the IRS, the controlled group rules provide the only circumstance in which multiple employers are treated as a single employer for purposes of determining whether the employer is an ALE. [EBIA Comment: In other words, a non-ALE is not transformed into an ALE merely because it participates in an AHP treated as a single plan in the large group market.]

EBIA Comment: Although AHPs may be structured to avoid some ACA reforms applicable to the individual and small group markets, the DOL publication stresses that AHPs—and participating employers—continue to be subject to a multitude of legal requirements. Although the final regulations simplify some aspects of AHP creation and administration, there is still plenty of complexity. For more information, see EBIA’s ERISA manual at Sections XIX (“MEWAs—Multiple Employer Welfare Arrangements”) and XXVIII (“Fiduciary Duties Under ERISA”). See also EBIA’s Self-Insured Health Plans manual at Section V.E.2 (“Certain Plans Are Subject to State Mandates”), EBIA’s COBRA manual at Section V.M (“Multiple Employer Welfare Arrangements (MEWAs)”), and EBIA’s Health Care Reform manual at Section XXVIII.B (“Large Employers Are Potentially Subject to an Assessable Payment (Penalty Tax)”).

Contributing Editors: EBIA Staff.

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