Insights

DOL and IRS Release Guidance on Association Health Plans


On Aug. 20, 2018, the DOL and IRS released guidance on association health plans (AHPs). As background, in June 2018 the DOL published final regulations on AHPs. Those regulations allow more employer groups and associations to form AHPs by relaxing ERISA’s original rules on AHPs. Specifically, through the new AHP regulations, AHPs can now be offered to employers in a state, city, county or multi-state metro area, or to employers in a common trade, industry or profession. Additionally, the new regulations allow sole proprietors to join AHPs.

DOL Compliance Assistance
The DOL’s compliance assistance document features a discussion of the new regulations and provides answers to a number of questions pertaining to the administration of AHPs under the law. Specifically, the document confirms that AHPs are employee welfare benefit plans under ERISA, and therefore must meet ERISA’s reporting, disclosure and fiduciary requirements of plans and plan sponsors. This means that AHPs will still need to furnish SPDs, SMMs, and SBCs to employees covered by the plan. Likewise, both fully insured and self-insured AHPs will have to file Forms 5500 and M-1 (since AHPs are also MEWAs). AHPs must also comply with the benefits claims procedures, consumer health care protection provisions and fiduciary rules imposed on ERISA fiduciaries.

Notably, the Department discusses COBRA and points out that they anticipate future guidance on the application of COBRA to AHPs that provide coverage to employers that have less than 20 employees (which is the threshold of employees that makes an employer subject to COBRA).

The remaining questions and answers in the document discuss enforcement of AHPs. The DOL makes it clear that AHPs will also be able to avail themselves of any necessary prohibited transaction exemptions as well as the DOL’s Voluntary Fiduciary Correction Program (VFCP – which allows plan sponsors to self-correct certain violations of ERISA). However, they also reiterate the fact that ERISA allows the DOL to issue cease-and-desist orders or summary seizure orders to MEWAs that are fraudulent or create a risk of immediate danger or harm to the public. Additionally, the document reminds the public that state insurance regulators also have jurisdiction over AHPs, including self-insured AHPs.

The document ends by identifying the timeline under which AHPs can be established or operate under the DOL’s new rules, and echoes an earlier part of the document in stating that AHPs formed prior to the new rules can operate under the old regulations or elect to follow the new regulations.

IRS Q&A on Employer Mandate & AHPs
The IRS updated their Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act to discuss AHPs and the employer mandate. Specifically, in “Q&A 18,” the IRS states that the employer mandate does not apply to an employer participating in an AHP unless they are otherwise subject to the employer mandate. In other words, employers that are not an Applicable Large Employer (ALE) under the ACA will not become one by virtue of joining an AHP.

Although the guidance from the DOL and IRS does not present new information, entities seeking to establish an AHP should consider this guidance and familiarize themselves with the resources provided by the documents. We’ll continue to report on additional developments as the DOL and IRS provide them.

Association Health Plans ERISA Compliance Assistance »
IRS Q&A »