Association Health Plans Present Opportunities for Employers
The Department of Labor (DOL) and Internal Revenue Service (IRS) recently released guidance related to the DOL's June 28th final rule on association health plans (AHPs). As background, the AHP rules permit employers to join together as a single group for health insurance purposes through a more flexible commonality of interest test. The additional guidance is meant to help plan sponsors and employers understand the basic rules for managing and operating AHPs. The DOL's Association Health Plans ERISA Compliance Assistance guidance included the following general information:
- Disclosure Rules: Plan administrators are required to provide plan information to participants and beneficiaries – most importantly, the summary plan description, summary of material modifications, and summary of benefits and coverage.
- Reporting Rules: AHPs are required to file a Form 5500 and a Form M-1 with the DOL annually.
- Benefit Claims Administration: Claims procedures must be maintained and established—the DOL has established rules regarding minimum timing and content standards for the claims procedures.
- COBRA Continuation Coverage Provisions: The COBRA continuation requirements were described and it was noted that future guidance is anticipated on the application of COBRA continuation to small AHPs (those that provide coverage to fewer than 20 employees).
- Fiduciary Rules: AHPs must abide by ERISA's fiduciary standards and rules. For example, AHPs must have a written document describing the benefits structure and day-to-day operations of the plan and must discharge their duties solely in the interests of plan participants and beneficiaries.
- Voluntary Correction Programs: AHPs are eligible to participate in the DOL's Voluntary Fiduciary Correction Program, which covers 19 common transactions, including the failure by member employers to promptly send participant contributions to the AHP.
- MEWA Enforcement Provisions that Apply to AHPs: The DOL has enforcement authority over AHPs similar to multiple employer welfare arrangements (MEWAs). Specifically, the DOL may issue (1) a cease-and-desist order if the MEWA's conduct is fraudulent, creates an immediate danger to the public safety or welfare, or is causing or can be reasonably expected to cause significant, imminent, and irreparable public injury; (2) a summary seizure order if the MEWA is in a financially hazardous condition; or (3) criminal penalties for false statements in the marketing or sale of MEWAs.
The IRS has also updated its Questions and Answers on Employer Shared Responsibility Under the Affordable Care Act to clarify that for purposes of employer shared responsibility under the Affordable Care Act, an employer that is not an applicable large employer (ALE) does not become an ALE just because it participates in an AHP. Additionally, the IRS stated that an ALE is still subject to employer shared responsibility regardless of its participation in an AHP.
For more information about the final rule or the new guidance discussed above and how it may affect your business, please contact Jeff Cairns, Tom Dowling, Todd Martin, Lisa Rippey or the Stinson Leonard Street contact with whom you regularly work.