The Employee Benefits Security Administration (the “EBSA”) has now added to its website its Frequently Asked Questions (“FAQs”), Part VI, on the Affordable Care Act (the “Act”). These FAQs deal with group health plans maintaining their grandfathered status under the Act. Plans that retain their grandfathered status avoid a number of new requirements under the Act, such as the need for external review of denied benefit claims and (for insured plans) the need to meet nondiscrimination requirements. One highlight of the FAQs is a discussion of the “anti-abuse rule” in the interim final regulations relating to grandfathered status. The FAQs say the following:
Under the anti-abuse rule, transferring employees from one grandfathered plan or benefit package (the “transferor plan”) to another (the “transferee plan”) will cause the transferee plan to relinquish grandfather status , if amending the transferor plan to replicate the terms of the transferee plan would have caused the transferor plan to relinquish its own grandfather status. However, this rule applies only if there was no bona fide employment-based reason to transfer the employees.
For this purpose, the term “bona fide employment-based reason” embraces a variety of circumstances, including (but not limited to) any of the following:
–a benefit package is eliminated because the issuer exits the market, or no longer offers the product to the employer;
–low or declining participation in a benefit package makes it impractical for the employer to continue it;
— a benefit package is eliminated from a multiemployer plan, as agreed upon as part of the collective bargaining process; or
— a benefit package is eliminated for any reason, and multiple benefit packages covering a significant portion of other employees remain available to the employees being transferred.