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NSBA Submits Comments on Nondiscrimination Requirements for Group Health Plans

Under the Patient Protection and Affordable Care Act, fully insured, non-grandfathered group health plans must not discriminate in favor of highly compensated employees (HCEs). The nondiscrimination rules, which were added to the Internal Revenue Code at section 105(h) in 1978, formerly only applied to self-insured plans. HCEs include the 25 percent highest paid employees.

School districts may have difficulty complying with the nondiscrimination rules because they frequently contribute more to health insurance premiums of superintendents than other school employees. In Notice 2011-1 http://www.irs.gov/pub/irs-drop/n-11-01.pdf the IRS postponed compliance with the nondiscrimination rules until regulations are issued and sought comments on 13 specific issues.

Link to NSBA’s comments: http://www.nsba.org/SecondaryMenu/COSA/Updates/NSBA-IRS-Non-Discrimination-Letter.pdf

NSBA, with the assistance of an ad hoc COSA committee described below, submitted comments to the IRS and the other relevant regulatory agencies. As its most important point, NSBA requested that the agencies totally exempt school districts and other government entities from application of the nondiscrimination rules to fully insured, non-grandfathered group health plans.

In the event the agencies do not completely exempt school districts, NSBA asked them to do any/all of the following:   exclude premiums from the definition of “benefit”; change the definition of a HCE to exclude middle class workers; adopt a reasonable “safe harbor”; conclude the availability of coverage means compliance with the nondiscrimination rules; allow highly qualified employees to pay a tax on excess benefits instead of fining employers; exclude union employees and retirees from testing; and postpone the effective date of the regulations until all existing collective bargaining agreements and employment contracts expire.

Thanks to the following attorneys who served on or volunteered a colleague to serve on the ad hoc COSA committee who helped write, edit, and provide feedback on the comments: Heather Brickman, Barbara Erickson, and Nancy Freedman Krent, Hodges, Loizzi, Eisenhammer, Rodick & Kohn, Arlington Heights, Illinois; Ben Conley, Seyfarth Shaw, Chicago, Illinois; Mike Julka and David Weller, Lathrop & Clark, Madison, Wisconsin; Jim Keith, Adams & Reese, Jackson, Mississippi; Cynthia Lutz Kelly, Topeka Public Schools, Topeka, Kansas; Anne McCully Murphy, Fairfax County Public Schools, Falls Church, Virginia; David Mustone, Hunton & Williams, McLean, Virginia; Thomas Peterson and John Vogel, Tucker Arensberg, Pittsburgh, Pennsylvania; and Christopher Stevenson, DrummondWoodsum, Portland, Maine.

To discuss NSBA's comments, contact NSBA Senior Staff Attorney, Lisa Soronen, at lsoronen@nsba.org.

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