In 2011, PPACA will prohibit insured group health plans from discriminating in favor of highly compensated individuals regarding eligibility and benefits. These rules are already in place for self-insured plans.

The PPACA penalties imposed for failure to comply with nondiscrimination rules related to insured health plans are different than the penalties related to noncompliance with the rules related to self-funded health plans. If an insured group health plan fails to comply with the nondiscrimination rules, the employer/plan sponsor is subject to a penalty of $100 per day for each participant not receiving the discriminatory benefit, whereas under the self-funded plan rules highly compensated individuals in a discriminatory self-funded plan are taxed on medical expenses actually paid.

In December, the IRS delayed the effective date for compliance and enforcement of this provision of PPACA until the definition of discriminatory benefits in a group health plan can be clarified, and additional regulations or administrative guidance is released.

Click here to read Notice 2011-1.