Health Reform Nondiscrimination Provision

NOTE: Implementation of this provision has been delayed until additional regulations are issued. The description of this provision is based on the law itself. Provisions will be clarified under regulations when issued.  See IRS Will Not Enforce Non-Discrimination Clause….For Now.

Sometimes employers have different levels of benefits for different levels of employees in an organization. Under this provision, employers can’t offer better benefits to “highly compensated” employees. The intent is to ensure that entry-level employees receive the same level of benefits as highly compensated employees.

Definition of “highly compensated employees” follows Section 105 of the Internal Revenue Code.

Example: If your plan has no waiting period for the CEO, you may not have a 90-day waiting period for your other employees.

Plans can require lower dollar or premium percent contributions from employees who receive lower compensation.

This requirement excludes the following employees:

  • Part-time or seasonal
  • Union
  • Non-resident aliens who receive no earned income
  • Those who have not completed three years of service

The effective date of this requirement will be determined by regulations, which have not yet been issued.

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