IRS Enforcement Guidance Addresses Expatriate Health Plans and the ACA

Practical Law Legal Update 6-617-0149 (Approx. 6 pages)

IRS Enforcement Guidance Addresses Expatriate Health Plans and the ACA

by Practical Law Employee Benefits & Executive Compensation

Background

Notice 2015-43 builds on prior guidance addressing expatriate health plan compliance with the ACA. In March 2013, for example, the Departments of Labor (DOL), Health and Human Services (HHS) and Treasury (collectively, the Departments) provided transitional relief granting expatriate group health plans additional time to comply with certain ACA requirements (see Legal Update, Expatriate Plans Receive Extra Time for ACA Compliance). The Departments expanded this transition relief in January 2014 (see Legal Update, ACA FAQs Address Wellness Programs, Preventive Services, Expatriate Plans and More).

More recently, the EHCCA (enacted in December 2014) provided an exemption from certain ACA requirements that applies to:

Expatriate health plans, whether insured or self-funded.
Employers in their capacity as plan sponsors of expatriate health plans.
Expatriate coverage offered by health insurers.

The EHCCA generally applies to expatriate health plans issued or renewed on or after July 1, 2015 (see Legal Update, President Signs Bill Reforming Multiemployer Pension Plan Rules: ACA Exemption for Expatriate Health Plans).

Notice 2015-43

The Departments recognized in Notice 2015-43 that insurers, employers and plan sponsors need additional time and guidance to adjust their current arrangements to comply with the EHCCA. As a result, until further guidance is issued and subject to certain exceptions, taxpayers may use a reasonable good faith interpretation in applying the EHCCA's requirements. Under Notice 2015-43, treatment of an expatriate health plan (as defined in the Departments' March 2013 and January 2014 guidance) for EHCCA purposes is generally a reasonably good faith interpretation.

However, the good faith interpretation rules do not apply to:

Section 9010 fees.
Fees for funding the Patient-Centered Outcomes Research (PCOR) Institute (see Special Rules for PCOR Fee and Practice Note, Patient-Centered Outcomes Research (PCOR) Fees under the ACA).

ACA Information Reporting Requirements Still Apply

The EHCCA's exemptions do not apply to the ACA information reporting requirements under Sections 6055 and 6056 of the Internal Revenue Code (see Practice Notes, Information Reporting for Employers That Self-Insure and Insurers (Section 6055) and Information Reporting of Health Insurance Coverage by Large Employers (Section 6056)).

As a result, providers of minimum essential coverage (MEC) must comply with Section 6055 and large employers must comply with Section 6056, regardless of whether the coverage is offered or provided through an expatriate health plan. However, under rules applicable to expatriate health plans, statements to individuals reporting MEC (under Section 6055) or offers of employer coverage (under Section 6056) may be furnished in electronic format unless a recipient refuses consent.

Special Rules for PCOR Fees

Under Notice 2015-43 (and subject to future guidance), PCOR fees generally may be determined by excluding lives covered under:

A self-insured plan, for plan years starting on or after July 1, 2015.
A policy that is issued or renewed on or after July 1, 2015.

However, it must be demonstrated that the plan or policy was either:

Designed and issued specifically to cover primary employees who are:
- working and residing outside the US; or
- not US citizens or residents, but who are assigned to work in the US for a specific and temporary purpose or work in the US for no more than six months of the plan or policy year.
Designed to cover individuals who are members of a group of "similarly situated individuals" (see Individuals Considered Similarly Situated for EHCCA Purposes).

In determining whether a person resides outside of the US, the most recent address on file for the primary insured should be used.

Individuals Considered Similarly Situated for EHCCA Purposes

The EHCCA generally limits enrollment in an expatriate health plan to qualified expatriates, which includes an individual who is a member of a group of similarly situated individuals. An individual is a member of a group of similarly situated individuals if:

The group satisfies standards outlined in the EHCCA.
For a group organized to travel outside the US, each member of the group is expected to travel or live outside the US for at least six months of the policy year.
For a group organized to travel within the US, each member of the group is expected to travel or live in the US for not more than 12 months.
The group meets the test for having associational ties under the Public Health Service Act (PHSA).

Practical Impact

The special rules for expatriate health plans are an acknowledgement of the unique challenges that such plans face in complying with the ACA's requirements. For example, in the context of the ACA's external review rules, expatriate health plans may encounter difficulty in finding independent review organizations abroad (see Practice Note, External Review under the ACA).

Notice 2015-43 is a first step in addressing how, in light of the EHCCA, expatriate health plans must go about complying with the ACA. According to the notice, the Departments also intend to issue regulations under the EHCCA and comments relating to these regulations must be submitted by October 19, 2015.

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