Grandfathering Rules - New FAQ Guidance


This memo updates a prior memorandum on grandfathering rules which allow group health plans in existence on March 23, 2010 to delay or avoid impact of certain health care reform changes. This memo specifically discusses the impact of "soft guidance" issued in September and October 2010 by the Department of Labor, IRS and Department of Health and Human Services, in the form of Frequently Asked Questions.

One of the most significant changes in the FAQs was clarification that the six prohibited coverage changes causing loss of grandfathered status is a comprehensive list; in the grandfathering regulations issued in June 2010 the agencies left open the possibility that non-listed changes that were substantial or significant would jeopardize grandfathered status. This is helpful news for employers wishing to maintain grandfathered status, for instance to avoid application of nondiscrimination rules that apply to insured plans on January 1, 2011 (calendar year plans/policies).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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