What group health plan mandates apply to retiree health plans?

Question

Our company offers a retiree health plan to employees when they retire. What are the compliance considerations that apply to these plans?

Answer

Employer-sponsored retiree health plans must meet many of the same federal compliance requirements that apply to the group health plans that employers offer to their active employees, including ERISA, the Public Health Service Act and the Internal Revenue Code. However, if the retiree health plan is structured as a retiree-only health plan, it may avoid certain group health plan mandates as an excepted benefit.

Requirements that apply to retiree health plans include:

• ERISA reporting and disclosure requirements
• COBRA coverage continuation requirements
• HIPAA privacy and security rules
• Affordable Care Act (ACA) information reporting by health coverage providers

Certain group health plans can avoid specific coverage mandates if they qualify as “excepted benefits.” A retiree health plan can be an excepted benefit if structured as a “retiree-only” health plan. A retiree-only health plan is defined as “any group health plan for any plan year if, on the first day of such plan year, such plan has less than two participants who are current employees.” As best practice, a retiree-only health plan should be a separate plan from the group health plan that the employer offers to its active employees, requiring separate plan documents and Form 5500 filings.

A retiree-only health plan can avoid certain group health plan mandates, such as:

• Newborns’ and Mothers’ Health Protection Act
• Women’s Health and Cancer Rights Act
• Michelle’s Law
• Mental Health Parity and Addiction Equity Act
• ACA coverage mandates
• HIPAA special enrollment rules
• ACA transparency in coverage rules
• No Surprises Act
• Consolidated Appropriations Act, 2021 transparency requirements

Takeaways

• Employer sponsors of retiree health plans should carefully review the federal laws that apply and confirm that their plans are fully compliant.
• To reduce compliance requirements, a retiree health plan can be structured as a retiree-only health plan. This is best achieved by making the retiree-only health plan completely separate from the active employee plan. New and amended plan documents, for the new retiree-only health plan and the existing health plan under which the retirees are currently covered, would be necessary to establish the retiree-only health plan and separate it from the active employee plan. Maintaining separate plans would also require a separate Form 5500 filing for each plan.