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St. J RN RANWALLACE BRENNAN & FOLAN LLP

TLaw OFFICES 21515 Hawthorne Boulevard
Suite 1120
Torrance, CA 90503-6504

Tel (310) 792-1075,
Fax (310) 792-0635

Writer’s E-Mail:
jrstijohn@swhf.net

July 9, 2010

By US. Mail

U.S. Department of Labor

Office of Health Plan Standards and Compliance Assistance
Employee Benefits Security Administration

Room N-5653

Attn: RIN1210-AB42

200 Constitution Avenue N.W.

Washington D.C, 20210

Office of Consumer Information and Insurance Oversight
Department of Health and Human Services

Attn: OCHO-9991-IFC

P.O. Box 8016

Baltimore, MD 21244-1850

Internal Revenue Service
CC:PA:LPD:PR (Reg-118412-10)
Room 5205

P.O. Box 7604

Ben Franklin Station

Washington D.C. 20004

Re: Further Comments on Interim Final Rule Regarding
Status of Grandfathered Plans

To Whom It May Concern:

On June 21, 2010 and again on June 28, 2010, we wrote to you concerning certain issues
arising under the captioned regulations. We have yet another question, this time concerning the
interpretation of Subsection (g)(v)(A).

As you know, this Subsection specifies that grandfathered status will be lost if there is a
decrease in the employer’s share of the cost of coverage by more than five percentage points.
However, the use of the words “the employer” implies that the plan is a single~employer plan. How
is this to be applied to multiemployer plans?


Department of Labor

Department of Health and Human Services
Internal Revenue Service

July 9, 2010

Page 2

One plan that our firm represents is funded by more than 230 current collective bargaining
agreements. Many of these collective bargaining agreements contain limits on the employers’
contribution obligations. When these limits are reached any increase in contributions necessary to
fund the plan are borne by the employees.

For some collective bargaining agreements the employer’s contribution has already reached
the limit, and for others the limit will be reached well before the expiration of those agreements.
This means that while the employer’s contribution will not decrease in absolute terms, it will
decrease as a percentage of the plan’s cost of coverage. As we are sure you understand, the plan’s
cost of coverage will increase in the future, both because of the implementation of changes required
for all plans (including grandfathered plans) as well as by increases in health care costs in general.

Itis therefore virtually certain that at least one participating employer, during the term of its
current collective bargaining agreement, will have a decrease in its share of the cost of coverage that
exceeds five percentage points. Would this cause the plan to lose its status as a grandfathered plan?

For a multiemployer plan, subsection (g)(v)(A) could be interpreted in two ways:

(A) Loss of grandfathered status will occur if any participating employer’s share of the
cost of coverage drops by more than five percentage points; or

(B) Loss of grandfathered status will occur only if the average share of the cost of
coverage for all participating employers falls by more than five percentage points.

The plan year for the plan we have described above begins on October 1, 2610. Since the
regulations are applicable to plan years beginning after September 23, 2010, the new regulations,
including the rules on loss of grandfathered status, will apply to the plan on October 1. Prompt
clarification of this issue is therefore needed.

Very truly yours,

IRS/sf

0123... epts3.07-09-10. 3rd, lt. wpd.

ce: Gerry Crews
Peter Meliak
Kathy Dyche