As interest in association health plans (AHPs) continues to swirl, the Department of Labor (DOL) and Internal Revenue Service (IRS) recently published some helpful information on how these work. (If you aren’t familiar with AHPs, check out our discussion of the final DOL rules on this topic here .)

DOL Compliance Assistance Document

The DOL first issued a compliance assistance publication designed to address how existing laws apply to AHPs. In short, for purposes of these laws, AHPs are pretty much like any employer plan. Specifically:

  • Disclosure.AHPs are required to distribute summary plan descriptions, summaries of material modifications, and summaries of benefits and coverage, just as an employer plan would.
    • Employer Tip : In evaluating potential AHPs, consider asking for copies of these documents to ensure the AHP is providing them. Also consider asking how these documents will be distributed to participants to make sure that it works for your workforce and is consistent with applicable law.
  • Reporting.AHPs must file both a Form 5500, like any plan, and a Form M-1. The Form M-1 is a specific filing required by multiple employer welfare arrangements, or MEWAs and is not something most employer plans have to file.
    • Employer Tip : Employers considering joining an AHP may want to check the DOL website to make sure the AHP has filed the Form M-1.
  • Claims Procedures.Federal law (including the Affordable Care Act (ACA)) requires plans to follow specific timing and disclosure rules for claims and appeals. An AHP must abide by these rules.
  • COBRA?COBRA allows individuals to continue health coverage after they would otherwise lose it, under specific circumstances, like a termination of employment, to name just one. The tricky part is that COBRA generally does not apply to employers who employed fewer than 20 employees in the prior year. If a bunch of small employers join together to form an AHP, does COBRA apply to the AHP? The DOL document doesn’t say. However, it does say that the DOL anticipates future rules will address this, so stay tuned.
    • Employer Tip : If an AHP is fully-insured, then state laws may require continuation coverage. These state laws can apply when federal COBRA does not. They can also require coverage beyond what federal COBRA requires.
  • Fiduciary Rules.Federal benefits law, known as ERISA, requires plans, including AHPs, to meet certain basic requirements. Among these are the requirement to have a plan document and the requirement to name a fiduciary that is in charge of overseeing the administration of the plan (sometimes called the “plan administrator”). A fiduciary under ERISA is required to act solely in the interests of plan participants and beneficiaries. This means they cannot take into account their own interests when running a plan, or overseeing how it is run (how a plan is designed, on the other hand, is usually not a fiduciary decision). In picking service providers and making other decisions about how the plan is run, the AHP must only consider what is best for participants and beneficiaries.
    • Employer Tip : AHPs have to be member-controlled. This means that employers may end up participating in certain decisions related to AHP administration. This would make them ERISA fiduciaries (just as they would be for a plan they sponsor). Employers considering joining an AHP should ask about what fiduciary training the AHP provides, if any. An AHP is not required to offer this. However, it is valuable for employers who are not already familiar with ERISA’s fiduciary rules, so employers getting involved in an AHP may want to seek out that education.
  • Other Legal Rules.The DOL guidance also addresses other legal rules that apply to AHPs. These include, among others, the ability of AHPs to use the DOL’s Voluntary Fiduciary Correction Program when they make certain mistakes. The guidance also confirms that states will continue to have a significant role in regulating AHPs, as we have discussed elsewhere .
    • Employer Tip : Before spending too much time evaluating an AHP, confirm with the AHP or, better yet, with a benefits or insurance lawyer whether AHPs are allowed in your state.

The DOL compliance assistance publication also provides links to some helpful information on the DOL website on these and other relevant topics.

IRS Confirms AHPs Don’t Trigger ACA Employer Mandate

Around the time the DOL released its publication, the IRS also added a new Q&A 18 on AHPs to its website . Specifically, the Q&A says small employers who are not subject to the ACA employer mandate  do not become subject to the employer mandate just by joining an AHP.

Generally, an employer is subject to the mandate if it employed, on average, 50 or more full-time and full-time equivalent employees in the prior calendar year. The employer mandate rules do treat certain entities in ownership chains, or with common owners, as a single “employer”. However, as the Q&A confirms, joining an AHP is not enough by itself to make an employer subject to the employer mandate. This means that employers who are not currently subject to the ACA employer mandate should not fear that they will trigger the mandate merely by joining an AHP.

If you have any questions, please contact your HUB Advisor . View more compliance articles in our Compliance Directory .

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.