At Vigilant, we have received many questions about how the grandfathered status rules apply to our member employers’ health plans. In previous blog posts, we’ve discussed how the grandfathering rules apply to the health plans of non-union employers and how they apply to collectively bargained plans. But where do you stand on the grandfathering issue if part of your workforce is represented by a union and part of your workforce is non-union? And does it matter if all of your workers are in a single plan, or if you maintain separate plans for your union versus non-union employees? Here, we’ll try to answer some of the most-asked questions:
1. I have both union and non-union employees participating in a single plan. How do I know if my plan is considered to be “collectively bargained” under the health care reform laws? There is no formal guidance on this question, but based on IRS guidance issued under other federal laws that affect collectively bargained plans, your plan will likely be considered to be collectively bargained if at least 25 percent of the employees participating in the plan are union-represented. If fewer than 25 percent of the employees in the plan are union-represented, Vigilant recommends you apply the rules for non-collectively bargained plans.
2. My plan is collectively bargained and it is self-insured. How do the grandfathering rules apply to my plan? A self-insured plan is one in which benefits are paid out of the company’s general assets, or out of a separate trust, and not pursuant to a contract with an insurance company. If your collectively bargained plan is self-insured, then you are subject to the same grandfathering rules that we discussed in previous blog posts for non-collectively bargained plans.
3. My plan is collectively bargained and it is insured. How do the grandfathering rules apply to my plan? An insured plan is one in which benefits under the plan are paid by an insurance company, pursuant to a contract between the employer (or plan) and an insurance company. Collectively bargained, insured plans are subject to a special grandfathering rule: the plan remains grandfathered until the date that the last collective bargaining agreement (CBA) (that was in effect on March 23, 2010) relating to the plan terminates. If yours is the only CBA relating to the plan, then you are grandfathered until the date your CBA expires. If you participate in an insured multiemployer plan in which other employers also participate, then the plan is grandfathered until the last of the all the CBAs relating to that plan terminates. Once the last CBA relating to the plan terminates, you then look to see if any changes have been made to the plan that would cause a loss of grandfathered status under the regulations (see previous blog posts for more on how a plan can lose grandfathered status). If you participate in a multiemployer plan with other unionized employers, the plan should communicate with you as to its grandfathered status.
4. My company participates in the Vigilant Group Benefits Trust (VGBT) and some or all of our employees who participate in the Trust are union-represented. How do the grandfathering rules apply to me? The VGBT is an insured health plan. However, there is currently no guidance on how the grandfathering rules apply to a plan like the VGBT, which is neither a single employer plan, nor a “Taft-Hartley,” or multiemployer plan. The safest option may be to consider yourself immediately non-grandfathered, but if you do so, you may no longer be able to offer different benefits to different classes of employees due to the new nondiscrimination mandate for insured, non-grandfathered plans. Any changes to your benefits structure or contributions must be negotiated with the union. Your Vigilant benefits adviser can help you evaluate how to proceed and your Vigilant staff representative can assist you with union negotiations and strategy.
5. What rules apply if I maintain both a collectively bargained health plan and a non-collectively bargained health plan for the different sectors of my workforce? The grandfathering rules apply on a plan by plan basis, so if you have more than one plan, you should apply the appropriate rules to each plan to determine its grandfathered status independently of the other plans.
If you have questions about how the rules on grandfathered status apply to your health plan (or plans), contact K.Cienfuegos@VigilantCounsel.org for assistance.