Watch Out! There Are New Rules Regarding Excepted Benefits

Does your company offer dental, vision, long-term care or employee assistance plans? If it does, you should be aware of new regulations jointly issued by the IRS, the Department of Labor, and the Department of Health and Human Services. The new rules should make these plans more attractive to both employers and employees.

Limited Excepted Benefits

The new regulations address limited excepted benefits, which are separate from employer group health plans. These benefits often include limited-scope dental and vision plans, as well as benefits for long-term care, nursing home care and home health care.

The excepted status is what is key, because excepted benefits are not subject to some of the portability and nondiscrimination requirements of the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA). In addition, employees who are eligible to participate in excepted plans are not precluded from receiving tax credits for their insurance premiums if they obtain health care coverage through a health insurance exchange.

What Changed?

Before the rules were enacted, employers had to collect contributions from participants before their limited-scope vision, dental plans or long-term care benefits could qualify as excepted. However, the agencies themselves came to the realization that in some cases, the cost of collecting the nominal contribution would be greater than the contribution itself.

The agencies then rescinded the requirement that plan participants pay an additional premium or contribution before limited benefit plans could qualify as excepted. The IRS also stated that limited-scope vision or dental benefits didn’t have to be offered in connection with a major medical or primary group health plan to be considered excepted.

In addition, the new rules establish four criteria under which employee assistance plans (EAPs) can be considered as excepted benefit plans. First, EAPs cannot provide significant health care benefits. The amount, scope and duration of the benefits offered determine what is significant.  For instance, an EAP that provides disease management services for individuals with chronic conditions most likely wouldn’t qualify as an excepted benefit plan.

In addition, an EAP’s benefits cannot be coordinated with the benefits available under another group health plan, and employees cannot be required to provide contributions or to pay premiums to participate. Finally, the EAP cannot impose any cost-sharing requirements.

Are You Ready?

These new rules have kicked in for plan years beginning on or after Jan. 1, 2015, so make sure you contact your benefits advisor. Your advisor can offer additional insight on excepted benefits and the impact of these rules.

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