American Benefits Council
Benefits Byte


December 18, 2014

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

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Summary: Expatriate Provision Included in Omnibus Spending Bill

The Consolidated and Further Continuing Appropriations Act (H.R. 83), newly approved by Congress and signed into law by President Obama on December 16, includes clarifications regarding which provisions of the Patient Protection and Affordable Care Act (PPACA) apply to expatriate health plans. The vast majority of Council member companies have large numbers of employees outside the United States and, accordingly, the Council has long supported public policies that preserve health care coverage for expatriate employees and family members.

An expatriate health plan is generally defined as (1) a group health plan, (2) health insurance coverage offered in connection with a group health plan, or (3) health insurance coverage offered to certain expatriates (and their dependents) that meets certain requirements under the legislation. Substantially all of the primary enrollees must be “qualified expatriates,” which means (1) certain foreign employees transferred or assigned to the U.S. for a specific and temporary employment purpose or assignment, (2) individuals working outside the U.S. for at least 180 days in a 12-month period, and (3) individuals who are members of certain groups, such as students or religious missionaries.

The application of PPACA to expatriate health plans – and to the employer sponsors and employees covered by such plans – has created compliance uncertainty among plan sponsors and caused them to consider obtaining coverage for their ex-pats from non-U.S. insurance carriers. Although some of the compliance uncertainty was addressed in earlier transition guidance issued by the federal agencies, the guidance was temporary and did not fully address several outstanding concerns.

As we reported in the December 12 Benefits Byte, the provision included in H.R. 83 is based on The Expatriate Health Coverage Clarification Act (H.R. 4414), which (after failing once) ultimately passed the House of Representatives earlier this year. The legislation was the subject of recent bipartisan discussions between the House and Senate and provides relief from specific PPACA requirements, fees and taxes for multi-national employers, globally mobile individuals and U.S. providers of expatriate insurance coverage, with the aim of ensuring that U.S. providers of this type of coverage are not at a competitive disadvantage against non-U.S. carriers who are not subject to PPACA. The provisions of the legislation that apply to expatriate health insurance issuers of fully insured expatriate health plans will only apply to health insurers that are licensed in the U.S.

Specifically, the measure:

  • Exempts fully insured and self-funded expatriate health plans from most of PPACA’s market reforms (though not the adult dependent/age 26 requirement).
  • Deems expatriate health plans to be “minimum essential coverage” for expatriate employees and their dependents, regardless of where they are located in the world.
  • Deems expatriate health plans to beminimum essential coverage under an eligible employer-sponsored plan” for purposes of the employer mandate with respect to certain foreign employees working in the U.S. and certain U.S. expatriates working abroad, but does not exempt employers that provide or purchase these plans from other employer mandate requirements including reporting responsibilities.
  • Exempts expatriate plans from the health insurance fee (after 2015, with transition rules for 2014 and 2015), the transitional reinsurance program fee, and the Patient Centered Outcomes Research Institute/Comparative Effectiveness Research Fee.
  • Exempts employer-sponsored coverage of most categories of expatriates from the excise tax on high cost employer-sponsored health coverage.
  • Exempts expatriate health plans from a change in the definition of a “small group,” which could have prevented the sale of expatriate coverage to employers with 50 to 99 lives.
  • Exempts insurers of expatriate health plans and expatriate health plans from the so-called “administrative simplification” requirements such as the Summary of Benefits and Coverage.

Except for the health insurance fee provisions noted above, the legislation applies only to expatriate health plans issued or renewed on or after July 1, 2015.

The enactment of bipartisan legislation clarifying the treatment of expatriate coverage may signal a turning point for Congress in its approach to PPACA, with lawmakers demonstrating a newfound willingness to work together to improve or otherwise amend the law. The Council will continue to work with members of Congress on both sides of the aisle as we pursue targeted changes to ease burdens associated with PPACA and enhance employer health plan sponsorship.

For more information on the expatriate provision, contact Katy Spangler, senior vice president, health policy, at (202) 289-6700.

Council Comments to IRS on Proposed Transitional Amendments to Hybrid Plans

In a December 18 letter to the Internal Revenue Service (IRS), the Council, along with the Coalition to Preserve the Defined Benefit System, recommended a number of changes to the proposed transitional amendments for hybrid retirement plans to satisfy the market rate of return rules.

Hybrid retirement plans, such as cash balance plans and pension equity plans, are technically defined benefit plans but also contain features that resemble defined contribution plans.

The proposed amendments were released by the IRS on September 19, along with the final regulations addressing market rate of return for hybrid plans under the Pension Protection Act of 2006. The proposal is intended to provide transitional guidance for hybrid plans that are not yet in compliance with the final rules (see the September 18 Benefits Byte).

The letter offers a number of comments on the proposed recommendations, including:

  • Regulations should provide greater flexibility, with additional safe harbor transition methods, to be consistent with current law.
  • Any new approach with respect to pension equity plan (PEP) matters should not be applied retroactively, through either guidance or enforcement.
  • The status of participant-directed plans needs to be resolved before such plans are required to make amendments.
  • The final regulations included two new restrictive rules that were never included in any prior or proposed guidance and should be withdrawn (or, at a minimum, proposed in a future set of proposed hybrid plan regulations).

The letter also provides comments on numerous technical points in the proposed regulations.

The Council has requested the opportunity to testify at the public hearing scheduled for January 9, 2015. For more information, contact Lynn Dudley, senior vice president, global retirement and compensation policy, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

Notice: the information contained herein is general in nature. It is not, and should not be construed as, accounting, consulting, legal or tax advice or opinion provided by the American Benefits Council or any of its employees. As required by the IRS, we inform you that any information contained herein was not intended or written to be used or referred to, and cannot be used or referred to (i) for the purpose of avoiding penalties under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party any transaction or matter addressed herein (and any attachment).