Boardman Law Firm

Employee Benefits Update: Health Care Reform Nondiscrimination Affects Executive Benefits

By Cindy Van Bogaert
May 10, 2010

Here is your latest Employee Benefits Update from Cindy Van Bogaert, Partner and Chair of the Employee Benefits Practice Group at Boardman Law Firm LLP. This Employee Benefits Update provides information about how Health Care Reform nondiscrimination changes affect executive benefits.

Health Care Reform (the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act) has made sweeping changes. One of the changes is to prohibit insured plan discrimination in favor of "highly compensated individuals" under rules similar to those that currently apply to self-insured plans. These insured plan nondiscrimination rules generally will become effective for plan years starting on or after September 23, 2010 (January 1, 2011 for calendar year plan years).

It is not uncommon for executives to negotiate health benefits as part of their employment arrangements. Executives often fall into the highly compensated individual category which could lead to nondiscrimination compliance problems.

One of the compliance twists is that so-called "grandfathered plans" do not have to comply with this new nondiscrimination rule. While this may provide some comfort, employers should not be complacent. It is possible that changes to a plan will move a plan from grandfathered status and thus trigger application of the new nondiscrimination rule.

What should employers do?

1. Employers should work with counsel to evaluate their health plans and employment agreements to determine whether the new nondiscrimination rules or the grandfathered plans exception will apply.
2. Employers should consult with counsel regarding any changes to health plans or employment arrangements to avoid inadvertent loss of grandfathered plan protection.

Please contact me if I can be of assistance. If you want to get a broader picture of how Health Care Reform affects employer group health plans, including nondiscrimination and the grandfathered plan exception, consider our May 18 seminar: click here for more information.

Upcoming seminars:

• "Health Care Reform - Tax Credits and Opportunities Only for Small Employers," at the Evansville Inventors and Entrepreneurs Club in Evansville, WI on May 12, 2010.
• "How Health Care Reform Affects Employer Group Health Plans" Seminar in Madison, WI on May 18, 2010. For information: click here.
• "Fiduciary Responsibility," at Wisconsin Retirement Plan Professionals, Ltd in Milwaukee, WI on May 27, 2010. For contact information: http://wrppl.org/Home/tabid/88/Default.aspx.
• "HIPAA Privacy: Tougher Rules; Tougher Enforcement," at the Society for Human Resource Management (SHRM) Annual Conference & Exposition in San Diego, CA on June 28, 2010. For information and to register: http://www.shrm.org/CONFERENCES/annual/Pages/default.aspx.
• "401(k) Plans" Seminar in Madison, WI on September 14, 2010. For information: click here.
• "HIPAA Privacy Training" two seminars, one for the basics and one for new developments, both on October 26, 2010. If you work with employer health benefits, you should consider these training seminars to meet your legal obligations. For information: click here.
• "Fundamentals of Employee Benefit Plans," for the American Law Institute-American Bar Association, in Philadelphia, PA on April 6-8, 2011.

This update is not legal advice. Individuals should seek advice based on their particular circumstances from their own counsel.

If you have any questions or need assistance, please contact Cindy Van Bogaert at (608) 283-7543 or Email.

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