Apr 12, 2011

Repeal of PPACA’s Form 1099 Provision and DOL Issues Additional PPACA Guidance

Congress Passes Repeal of PPACA’s Form 1099 Provision

Last week, Congress passed a bill that would repeal the controversial Form 1099 tax reporting requirements under the Patient Protection and Affordable Care Act (“PPACA”). Under PPACA, beginning in 2012, businesses would be required to submit a Form 1099 to the Internal Revenue Service for every vendor from which they purchase goods or services worth $600 or more. H.R. 4, which was passed by both the U.S. House of Representatives and the U.S. Senate, would repeal this tax reporting requirement. President Obama is expected to sign the bill.

DOL Issues New FAQs on PPACA

The Department of Labor (“DOL”) recently issued an additional set of frequently asked questions (“FAQs”) addressing issues regarding grandfathered group health plan status under PPACA. As a reminder, a grandfathered group health plan is a group health plan in which at least one individual was enrolled on March 23, 2010. Grandfathered group health plans are exempt from certain provisions under PPACA.

The FAQs provide additional guidance on the types of actions that will cause a loss of grandfathered plan status. For instance, the FAQs address the complex “anti-abuse” rule under the grandfathered plan regulations. Under the “anti-abuse” rule, transferring employees from one grandfathered plan (the “transferor plan”) to another plan (the “transferee plan”) could cause the transferee plan to lose grandfathered status, if amending the transferor plan with the terms of the transferee plan would cause the transferor plan to lose grandfathered status. However, this anti-abuse rule only applies if there is no “bona fide employment-based reason” for the transfer of the employees.

The FAQs provide the following five instances where a benefit package could be eliminated and the transfer of employees to the transferee plan would not result in a loss of grandfathered status for the transferee plan:

  • When a benefit package is being eliminated because the issuer is exiting the market;
  • When a benefit package is being eliminated because the issuer no longer offers the product to the employer (e.g., because the employer no longer satisfies the issuer’s minimum participation requirement);
  • When low or declining participation by plan participants in the benefit package makes it impractical for the plan sponsor to continue to offer the benefit package;
  • When a benefit package is eliminated from a multiemployer plan as agreed upon as part of the collective bargaining process; or
  • When 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.

The FAQs also address other situations which will affect grandfathered status, such as cost sharing and prescription drugs, and the effect of increased premiums on retiree health contributions.

For more information regarding PPACA or the application of the rules and regulations underlying PPACA, please contact your SGR Executive Compensation and Employee Benefits counsel.

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