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As of: September 16, 2010 

Received: September 15, 2010 PUBLIC Status: Posted

Posted: September 16, 2010 

Tracking No. 80bS02f7 SUBMISSION Comments Due: September 15, ;WlO 

Submission Type: Web 

Docket: IRS-2010-0010 

Group Health Plans and Health Insurance Coverage Rules Relating to Status as a Grandfathered 

Health Plan Under the Patient Protection and Afforable Care Act 

Comment On: IRS-2010-0010-0002 

Group Health Plans and Health Insurance Coverage: Status as Grandfathered Health Plan under 

the Patient Protection and Affordable Care Act; Cross-Reference 

Document: IRS-201O-001O-09S2 

Comment on FR Doc # 2010-14487 

Submitter Information 

Name: Frank Joseph Morales 

Address: 

500 Union Street 


Suite 700 


Seattle, WAf 


Email: frankm@mrbklaw.com 

Phone: 206-224-9900 

Fax: 206-224-9820 

Organization: McKenzie Rothwell Barlow & Korpi 

---------------------------------------------------------------1---­

General Comment 

Please see attached comments. 

Attachments 

IRS-2010-0010-0952.1: Comment on FR Doc # 2010-14487 

https:/ Ifdms.erulemaking.net/fdms-web-agency IcomponentlsubmitterInfoCoverPage?Call=... 9/16/2010 
COMMENTS OF 


MCKENZIE ROTHWELL BARLOW & KORPI, P.S. 


TO THE 


INTERIM FINAL RULES GROUP HEALTH PLANS AND HEALTH INSURANCE 


ISSUERS RELATING TO STATUS AS A GRANDFATHERED HEALTH PLAN UNDER 


THE PATIENT PROTECTION AND AFFORDABLE CARE ACT 


26 CFR PARTS 54 AND 602, 29 CFR PART 2590, 45 CFR PART 147 


The law firm of McKenzie Rothwell Barlow & Korpi, P.S., on behalf of approximately 

100 jointly sponsored multiemployer trusts, submits the following comments to the Interim Final 

Rules Group Health Plans and Health Insurance Issuers Relating to Status as a Grandfathered 

Health Plan under the Patient Protection and Affordable Care Act ("Proposed Rule"). 

I. INTEREST OF MCKENZIE ROTHWELL BARLOW & KORPI 

McKenzie Rothwell Barlow & Korpi, P.S. provides consultation, collections, and 

litigation services to over 100 Taft-Hartley Trusts, including many multi employer health and 

welfare plans. These plans range in size from less than 100 participants to over 60,000 

participants covering participants in various states including Washington, Oregon, California, 

Idaho, Alaska, and Montana. Representative clients include funds in the following industries: 

Construction (Operating Engineers, Carpenters, Laborers, Plumbers, Ironworkers, 

Cement Masons and Plasterers, Bricklayers, Glassworkers, Sheet Metal Workers and 

Asbestos Workers); 

Maritime (Longshoremen, Inlandboatmen and Masters, Mates and Pilots); 

Retail and Office Workers (Clerks, Meat Cutters, Bakers, Pharmacists and Office 

Workers); 

Manufacturing and Warehousing (Machinists, Metal Fabricators, Warehousemen and 

Millmen); and 

Transportation (Teamsters, Automotive Machinists). 

McKenzie Rothwell Barlow & KOrpi, P.S. does not represent labor organizati.ons or 

employers in an individual capacity, but only in their capacity as sponsors of the plans. 

McKenzie Rothwell Barlow & Korpi, P.S. and our clients have a significant interest in the 

Proposed Rule because although the Proposed Rule impacts how the Trusts provide benefits to 

their participants. 

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II. 	 COMMENTS TO PROPOSED RULE 

1. 	 Need for Specific Guidance in Regards to MuItiemployer Plans 

The grandfathering regulations do not address how they will apply to multi employer 

plans. ERlSA § 3(37) defines multiemployer plans as a plan to which more than one employer is 

required pursuant to terms of collective bargaining agreements. Multiemployer plans raise 

unique issues given the large number of employees that may contribute to them, the :thct that 

contribution and participation choices are controlled by individual bargaining parties 

independent of the plan sponsor, have unique contribution formulas (hour banks, dollar banks, 

etc.) than single employer plans and provide retiree coverage at much higher levels. 

These issues raise a need for provisions dealing with multi employer plan issues. 

2. 	 New Collectively Bargaining Participation in Multiemployer Trusts 

The interim final regulations, 29 CFR 2590.715-1251(b)(l), allows a group health plan to 

cover new employees and their dependents hired after March 23, 2010. The regulations then 

indicate this is subject to 29 CFR 2590.715-1251(b)(2) which is titled "Anti-Abuse Rules." 

Subsection (ii) gives the following example: 

(ii) 	 Change in plan eligibility. A group health plan or health insurance 

coverage (including a benefit 'package under a group health plan) 

ceases to be a grandfathered health plan if­

(A) 	 Employees are transferred into the plan or health insurance 

coverage (the transferee plan) from a plan or health 

insurance coverage under which the employees were 

covered on March 23, 2010 (the transferor plan); 

(B) 	 Comparing the terms of the transferee plan with those of 

the transferor plan (as in effect on March 23, 2010) and 

treating the transferee plan as if it were an amendment of 

the transferor plan would cause a loss of grandfather status 

under the provisions of paragraph (g)( 1) ofthis section; and 

(C) 	 There was no bona fide employment-based reason to 

transfer the employees into the transferee plan. For this 

purpose, changing the terms or cost of coverage is not a 

bona fide employment-based reason. 

For multiemployer plans, the governing plan documents generally provide that an 

employer which has a bargaining agreement with a participating union may negotiate to 

participate in a particular multiemployer plan or benefit option. The proposed regulations raise a 

concern about new groups entering a multiemployer plan or benefit option. Multiemploy~~r plans 

would need to monitor each newly entering group that may negotiate into the plan after March 

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23, 2010 to determine if the newly entering group has made any of the changes contained in 29 

CFR 2590.715-1251 (g)(1). The interim final regulations suggest that if any such group (:nters a 

multiemployer plan, the entire plan may lose its grandfathered status. 

This places many multiemployer plans in an untenable situation. There chokes are 

freezing participation as of March 23, 2010 (including expelling groups that may have bargained 

into the multiemployer plan after March 23, 2010), monitoring each new collective bargaining 

agreement to assure there is no disqualifying changes or losing grandfathered status. 

The interim final regulations should recognize an exception for bargaining groups that 

negotiate into a collectively bargained plan. The exception should recognize that negotiating 

into a multi employer plan will not cause a loss of grandfathered status. If there is concern, this 

could be addressed by either placing a caveat that a negotiated change shall not be for a purpose 

inconsistent with the PP ACA or placing a percentage limitation on the number of participants 

that could be bargained into an existing plan. 

We would suggest the following modification to the proposed rules: 

(2) 	 Anti-abuse rules 

* * * 

(ii) 	 Change in plan eligibility 

* * * 

(c) 	 There was no bona fide employment-based reason 

to transfer the employees into the transferee plan. 

For purposes of this rule, a transfer pursuant to a 

collective bargaining into an existing benefit option 

contained in a multiemployer plan shall be 

presumed to be a bona fide employment-based 

reason and shall affect the grandfathered status of 

the transferee plan.' This presumption shall not exist 

if more than 25% of the participants in any plan 

option maintained by a multiemployer plan have' 

been transferred into it after March 23, 2010. 

3. 	 Treatment of Hourly Contribution Rates 

29 CFR 715-l251(g)(1) ofthe interim regulations describes changes that will cause a loss 

of grandfathered status. Subsection (g)(l )(v) deals with a decrease in contribution rates by 

employers and employee organizations. The regulations states that any decrease is measured as 

a percentage of the employer contribution as compared to the total cost of the plan. See 29 CFR 

715-1251 (g)(3 )(iii)(A). 

There is no similar percentage limitation stated where the contributions are based on an 

hourly rate. Many multi employer plans (particularly in the construction industry) have 

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412doclil50701 
contributions based on per~hour basis. Does a plan lose grandfathered status if the rat'e drops 

after March 23, 20107 Does it make a difference if their plan has employee payments and those 

increased by more than 5%? 

Many construction industry funds have dollar or hour banks. This means that 

contributory hours are placed in a bank. A set amount is withdrawn each month (for example, 

130 hours or $800) to provide coverage. Amounts contributed that exceed the withdrawa.l factor 

are banked. Is the test whether there is a 5% or more increase in the amount withdrawn from the 

bank? 

4. Retiree Only Plans 

The Preamble to the final regulations indicates that the exception for retiree-only plans 

under ERISA § 732 will continue in effect for retiree-only plans: 

Accordingly, the exceptions of ERISA § 732 and Code § 9831 for very 

small plans and certain retiree-only health plans, and for excepted benefits, 

remain in effect and thus ERISA § 715 and Code § 9815 as added by the 

Affordable Care Act do not apply to such plans as excepted benefits. 

At issue is whether this exception includes retiree-only options that are contained within 

the same multiemployer plans with plans offered only to active employers. May multiemployer 

plans have retiree options which are completely separate from any active options. Such plans 

have separate funding sources, separate reserves and provisions that prevent use of funds 

contributed for active groups being used for retiree coverage. The only linkage between the 

plans is that to be eligible for the retiree plan, the employee must have participated in the active 

plan prior to retirement. 

Guidance should be issued clarifying that those distinct retiree-only options are to be 

treated as retiree-only plans. They are plan options that are completely separate from any active 

plan. 

Absent such a ruling, the Department should provide guidance that a decision to create a 

separate retiree-only entity after March 23, 2010 is appropriate and any such new entity would be 

treated as a retiree-only plan. 

Thank you for the opportunity to comment on these Regulations. 

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