We are all expecting the Supreme Court to rule on the constitutionality of the Patient Protection and Affordable Care Act any day now. While there is much anticipation, good plan sponsors already should be preparing for how they will respond to the decision. So let’s look at some road-maps to prepare for the possible outcomes.
1. PPACA is upheld as constitutional. If PPACA is upheld, we have to look at complying with the upcoming requirements for the 2012 and 2013 plan years. Most importantly, we need a summary of benefits and coverage and we need to be prepared to hand that out in the next open enrollment. We also have to be prepared for health plan reporting on W-2s which is mandatory for the 2012 tax year. Also recall that beginning in January 2013, an individual’s annual maximum contributions are limited to $2,500 for flexible spending accounts. So if it is upheld, we have some significant changes to make in our administration process before the end of the 2012 plan year.
2. PPACA is struck down as unconstitutional. If PPACA is struck down, the first thing we will have to do is analyze what we have changed and how we changed it. Many plan sponsors will incorrectly assume that we revert back to the pre-PPACA status. But remember that we are dealing with ERISA plans and you can't just change an ERISA plan at the drop of a hat. We will have to prepare for mid-year coverage changes and amendments to coverage for the 2013 plan year. Enrollment and eligibility will have to be analyzed and appropriate notices issued to current participants. We will have to analyze tax implications to see if any special reporting is required for coverage provided to adult children. And we will have to decide whether or not it is cost effective to eliminate certain benefits provided to comply with PPACA as some of the changes made might actually be worth keeping. But most of all, we will have to amend plans to undo amendments already made, and follow the appropriate procedures for making plan amendments.
3. PPACA is partially upheld, partially struck down.
It is because of this option that plan sponsors should use this time to develop a map of what changes they have made and design a plan for undoing those changes. Plan sponsors do not want to be caught short trying to figure out what they still have to do to comply, or what they might have to do to revise their plan. Now is the perfect time to make a list of all the changes you made to comply with PPACA and how specifically you made the changes. Then prepare to either follow that map in reverse to undo changes, or continue forward to finish what we already started. We can't say for sure yet what the court will do, but we should at least know what we have done and what we still might have to do to comply (or change) and we will have a short window in which to do it. So take the time now to analyze your compliance thus far. Whatever the decision, we are going to have some serious work ahead of us.
Keith R. McMurdy is a New York-based partner with Fox Rothschild LLP. He can be reached at 212.878.7919 or email@example.com.
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