The Internal Revenue Service announced delayed enforcement for the new nondiscrimination provisions applicable to insured group health plans under the Patient Protection and Affordable Care Act of 2010 (as amended by the Health Care and Education Reconciliation Act of 2010; together the “Health Care Reform Law”).

The Health Care Reform Law requires non-grandfathered insured group health plans to satisfy the requirements of Internal Revenue Code Section 105(h)(2), previously applicable only to self-funded group health plans.  The new law effectively prohibits non-grandfathered insured group health plans from favoring highly compensated individuals with respect to eligibility or benefits.

The Health Care Reform Law would also require sponsors of noncompliant plans to pay an excise tax of $100 per day per affected individual beginning with the 2011 plan year.  This sent employers in search of alternative ways to meet contractual obligations with executives.