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Health Care Reform - Nondiscrimination Rules

Under the current law, an employer is required to satisfy nondiscrimination rules in the administration of their health plan.  Although these rules are currently in effect, a lack of Federal guidance has delayed any penalty.

The new rules prohibit discrimination with regard to eligibility and health benefits in a way that would favor highly compensated individuals. Providing different benefits to or excluding eligibility to some categories of employees on the basis of age, years of service, or compensation is not permissible under the new law. The Department of Labor has suggested violators could face fines of up to $100 a day for each employee discriminated against. 

Because Federal guidance may happen at any time, we are recommending that employer’s evaluate their current employment policies to consider changes to ensure they will be in compliance by offering coverage to all employees that meet their health plan's hourly requirement and probationary waiting period.  They should conduct nondiscrimination testing according to provisions of IRS Code 105(5) to confirm their plan complies with the provisions of Public Health Service Act section 2716 as amended by Patient Protection and Affordable Care Act section 1001(5). 

Treating employees differently in any way, whether in the plan document or in operation, raises red flags that should be checked with legal counsel—many discrimination problems are not obvious to the untrained eye.  If you have any concerns your plan will be in compliance, you should contact your attorney or tax advisor for assistance.


While every attempt has been made to ensure the accuracy of all information as of the publication date, the information provided is subject to change. Federal and state rules and interpretations of the Affordable Care Act (ACA) continue to evolve, and every individual’s or employer’s circumstances are unique. Please consult with your own legal and tax advisors for advice.


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