Full Text of ERISA Mental Health Parity Regulations


brought to you by AutismNews.net


[Code of Federal Regulations]
[Title 29, Volume 9]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 29 CFR 2590.712]

[Page 663-671]
 
                             TITLE 29--LABOR
  CHAPTER XXV--EMPLOYEE BENEFITS SECURITY ADMINISTRATION, DEPARTMENT OF LABOR
  PART 2590_RULES AND REGULATIONS FOR GROUP HEALTH PLANS--Table of Contents

                      Subpart C_Other Requirements

Sec. 2590.712 Parity in the application of certain limits to mental health benefits.

    (a) Definitions. For purposes of this section, except where the
context clearly indicates otherwise, the following definitions apply:
    Aggregate lifetime limit means a dollar limitation on the total
amount of specified benefits that may be paid under a group health plan
(or group health insurance coverage offered in connection with such a
plan) for an individual (or for a group of individuals considered a
single unit in applying this dollar limitation, such as a family or an
employee plus spouse).
    Annual limit means a dollar limitation on the total amount of
specified benefits that may be paid in a 12-month period under a plan
(or group health insurance coverage offered in connection with such a
plan) for an individual (or for a group of individuals considered a
single unit in applying this dollar limitation, such as a family or an
employee plus spouse).
    Medical/surgical benefits means benefits for medical or surgical
services, as defined under the terms of the plan or group health
insurance coverage, but does not include mental health benefits.
    Mental health benefits means benefits for mental health services, as
defined under the terms of the plan or group health insurance coverage,
but does not include benefits for treatment of substance abuse or
chemical dependency.
    (b) Requirements regarding limits on benefits--(1)--general--(i)
General parity requirement. A group health plan (or health insurance
coverage offered by an issuer in connection with a group health plan)
that provides both medical/surgical benefits and mental health benefits
must comply with paragraph (b)(2), (3), or (6) of this section.
    (ii) Exception. The rule in paragraph (b)(1)(i) of this section does
not apply if a plan, or coverage, satisfies the requirements of
paragraph (e) or (f) of this section.
    (2) Plan with no limit or limits on less than one-third of all
medical/surgical benefits. If a plan (or group health insurance
coverage) does not include an aggregate lifetime or annual limit on any
medical/surgical benefits or includes aggregate lifetime or annual
limits that apply to less than one-third of all medical/surgical
benefits, it may not impose an aggregate lifetime or annual limit,
respectively, on mental health benefits.
    (3) Plan with a limit on at least two-thirds of all medical/surgical
benefits. If a plan (or group health insurance coverage) includes an
aggregate lifetime or annual limit on at least two-thirds of all
medical/surgical benefits, it must either--
    (i) Apply the aggregate lifetime or annual limit both to the
medical/surgical benefits to which the limit would otherwise apply and
to mental health benefits in a manner that does not distinguish between
the medical/surgical and mental health benefits; or

[[Page 664]]

    (ii) Not include an aggregate lifetime or annual limit on mental
health benefits that is less than the aggregate lifetime or annual
limit, respectively, on the medical/surgical benefits.
    (4) Examples. The rules of paragraphs (b)(2) and (3) of this section
are illustrated by the following examples:

    Example 1. (i) Prior to the effective date of the mental health
parity provisions, a group health plan had no annual limit on medical/
surgical benefits and had a $10,000 annual limit on mental health
benefits. To comply with the parity requirements of this paragraph (b),
the plan sponsor is considering each of the following options:
    (A) Eliminating the plan's annual limit on mental health benefits;
    (B) Replacing the plan's previous annual limit on mental health
benefits with a $500,000 annual limit on all benefits (including
medical/surgical and mental health benefits); and
    (C) Replacing the plan's previous annual limit on mental health
benefits with a $250,000 annual limit on medical/surgical benefits and a
$250,000 annual limit on mental health benefits.
    (ii) In this Example 1, each of the three options being considered
by the plan sponsor would comply with the requirements of this section
because they offer parity in the dollar limits placed on medical/
surgical and mental health benefits.
    Example 2. (i) Prior to the effective date of the mental health
parity provisions, a group health plan had a $100,000 annual limit on
medical/surgical inpatient benefits, a $50,000 annual limit on medical/
surgical outpatient benefits, and a $100,000 annual limit on all mental
health benefits. To comply with the parity requirements of this
paragraph (b), the plan sponsor is considering each of the following
options:
    (A) Replacing the plan's previous annual limit on mental health
benefits with a $150,000 annual limit on mental health benefits; and
    (B) Replacing the plan's previous annual limit on mental health
benefits with a $100,000 annual limit on mental health inpatient
benefits and a $50,000 annual limit on mental health outpatient
benefits.
    (ii) In this Example 2, each option under consideration by the plan
sponsor would comply with the requirements of this section because they
offer parity in the dollar limits placed on medical/surgical and mental
health benefits.
    Example 3. (i) A group health plan that is subject to the
requirements of this section has no aggregate lifetime or annual limit
for either medical/surgical benefits or mental health benefits. While
the plan provides medical/surgical benefits with respect to both network
and out-of-network providers, it does not provide mental health benefits
with respect to out-of-network providers.
    (ii) In this Example 3, the plan complies with the requirements of
this section because they offer parity in the dollar limits placed on
medical/surgical and mental health benefits.
    Example 4. (i) Prior to the effective date of the mental health
parity provisions, a group health plan had an annual limit on medical/
surgical benefits and a separate but identical annual limit on mental
health benefits. The plan included benefits for treatment of substance
abuse and chemical dependency in its definition of mental health
benefits. Accordingly, claims paid for treatment of substance abuse and
chemical dependency were counted in applying the annual limit on mental
health benefits. To comply with the parity requirements of this
paragraph (b), the plan sponsor is considering each of the following
options:
    (A) Making no change in the plan so that claims paid for treatment
of substance abuse and chemical dependency continue to count in applying
the annual limit on mental health benefits;
    (B) Amending the plan to count claims paid for treatment of
substance abuse and chemical dependency in applying the annual limit on
medical/surgical benefits (rather than counting those claims in applying
the annual limit on mental health benefits);
    (C) Amending the plan to provide a new category of benefits for
treatment of chemical dependency and substance abuse that is subject to
a separate, lower limit and under which claims paid for treatment of
substance abuse and chemical dependency are counted only in applying the
annual limit on this separate category; and
    (D) Amending the plan to eliminate distinctions between medical/
surgical benefits and mental health benefits and establishing an overall
limit on benefits offered under the plan under which claims paid for
treatment of substance abuse and chemical dependency are counted with
medical/surgical benefits and mental health benefits in applying the
overall limit.
    (ii) In this Example 4, the group health plan is described in
paragraph (b)(3) of this section. Because mental health benefits are
defined in paragraph (a) of this section as excluding benefits for
treatment of substance abuse and chemical dependency, the inclusion of
benefits for treatment of substance abuse and chemical dependency in
applying an aggregate lifetime limit or annual limit on mental health
benefits under option (A) of this Example 4 would not comply with the
requirements of paragraph (b)(3) of this section. However, options (B),
(C), and (D) of this Example 4 would comply with the requirements of
paragraph (b)(3) of this section because they offer parity in the dollar
limits

[[Page 665]]

placed on medical/surgical and mental health benefits.

    (5) Determining one-third and two-thirds of all medical/surgical
benefits. For purposes of this paragraph (b), the determination of
whether the portion of medical/surgical benefits subject to a limit
represents one-third or two-thirds of all medical/surgical benefits is
based on the dollar amount of all plan payments for medical/surgical
benefits expected to be paid under the plan for the plan year (or for
the portion of the plan year after a change in plan benefits that
affects the applicability of the aggregate lifetime or annual limits).
Any reasonable method may be used to determine whether the dollar
amounts expected to be paid under the plan will constitute one-third or
two-thirds of the dollar amount of all plan payments for medical/
surgical benefits.
    (6) Plan not described in paragraph (b)(2) or (3) of this section--
(i) In general. A group health plan (or group health insurance coverage)
that is not described in paragraph (b)(2) or (3) of this section, must
either--
    (A) Impose no aggregate lifetime or annual limit, as appropriate, on
mental health benefits; or
    (B) Impose an aggregate lifetime or annual limit on mental health
benefits that is no less than an average limit calculated for medical/
surgical benefits in the following manner. The average limit is
calculated by taking into account the weighted average of the aggregate
lifetime or annual limits, as appropriate, that are applicable to the
categories of medical/surgical benefits. Limits based on delivery
systems, such as inpatient/outpatient treatment or normal treatment of
common, low-cost conditions (such as treatment of normal births), do not
constitute categories for purposes of this paragraph (b)(6)(i)(B). In
addition, for purposes of determining weighted averages, any benefits
that are not within a category that is subject to a separately-
designated limit under the plan are taken into account as a single
separate category by using an estimate of the upper limit on the dollar
amount that a plan may reasonably be expected to incur with respect to
such benefits, taking into account any other applicable restrictions
under the plan.
    (ii) Weighting. For purposes of this paragraph (b)(6), the weighting
applicable to any category of medical/surgical benefits is determined in
the manner set forth in paragraph (b)(5) of this section for determining
one-third or two-thirds of all medical/surgical benefits.
    (iii) Example. The rules of this paragraph (b)(6) are illustrated by
the following example:

    Example. (i) A group health plan that is subject to the requirements
of this section includes a $100,000 annual limit on medical/surgical
benefits related to cardio-pulmonary diseases. The plan does not include
an annual limit on any other category of medical/surgical benefits. The
plan determines that 40% of the dollar amount of plan payments for
medical/surgical benefits are related to cardio-pulmonary diseases. The
plan determines that $1,000,000 is a reasonable estimate of the upper
limit on the dollar amount that the plan may incur with respect to the
other 60% of payments for medical/surgical benefits.
    (ii) In this Example, the plan is not described in paragraph (b)(3)
of this section because there is not one annual limit that applies to at
least two-thirds of all medical/surgical benefits. Further, the plan is
not described in paragraph (b)(2) of this section because more than one-
third of all medical/surgical benefits are subject to an annual limit.
Under this paragraph (b)(6), the plan sponsor can choose either to
include no annual limit on mental health benefits, or to include an
annual limit on mental health benefits that is not less than the
weighted average of the annual limits applicable to each category of
medical/surgical benefits. In this example, the minimum weighted average
annual limit that can be applied to mental health benefits is $640,000
(40%x$100,000+60%x$1,000,000=$640,000).

    (c) Rule in the case of separate benefit packages. If a group health
plan offers two or more benefit packages, the requirements of this
section, including the exemption provisions in paragraph (f) of this
section, apply separately to each benefit package. Examples of a group
health plan that offers two or more benefit packages include a group
health plan that offers employees a choice between indemnity coverage or
HMO coverage, and a group health plan that provides one benefit package
for retirees and a different benefit package for current employees.

[[Page 666]]

    (d) Applicability--(1) Group health plans. The requirements of this
section apply to a group health plan offering both medical/surgical
benefits and mental health benefits regardless of whether the mental
health benefits are administered separately under the plan.
    (2) Health insurance issuers. The requirements of this section apply
to a health insurance issuer offering health insurance coverage for both
medical/surgical benefits and mental health benefits in connection with
a group health plan.
    (3) Scope. This section does not--
    (i) Require a group health plan (or health insurance issuer offering
coverage in connection with a group health plan) to provide any mental
health benefits; or
    (ii) Affect the terms and conditions (including cost sharing, limits
on the number of visits or days of coverage, requirements relating to
medical necessity, requiring prior authorization for treatment, or
requiring primary care physicians' referrals for treatment) relating to
the amount, duration, or scope of the mental health benefits under the
plan (or coverage) except as specifically provided in paragraph (b) of
this section.
    (e) Small employer exemption--(1) In general. The requirements of
this section do not apply to a group health plan (or health insurance
issuer offering coverage in connection with a group health plan) for a
plan year of a small employer. For purposes of this paragraph (e), the
term small employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least two but not more than 50 employees on business days
during the preceding calendar year and who employs at least two
employees on the first day of the plan year. See section 732(a) of the
Act and Sec. 2590.732(a), which provide that this section (and certain
other sections) does not apply to any group health plan (and health
insurance issuer offering coverage in connection with a group health
plan) for any plan year if, on the first day of the plan year, the plan
has fewer than two participants who are current employees.
    (2) Rules in determining employer size. For purposes of paragraph
(e)(1) of this section--
    (i) All persons treated as a single employer under subsections (b),
(c), (m), and (o) of section 414 of the Internal Revenue Code of 1986
(26 U.S.C. 414) are treated as one employer;
    (ii) If an employer was not in existence throughout the preceding
calendar year, whether it is a small employer is determined based on the
average number of employees the employer reasonably expects to employ on
business days during the current calendar year; and
    (iii) Any reference to an employer for purposes of the small
employer exemption includes a reference to a predecessor of the
employer.
    (f) Increased cost exemption--(1) In general. A group health plan
(or health insurance coverage offered in connection with a group health
plan) is not subject to the requirements of this section if the
requirements of this paragraph (f) are satisfied. If a plan offers more
than one benefit package, this paragraph (f) applies separately to each
benefit package. Except as provided in paragraph (h) of this section, a
plan must comply with the requirements of paragraph (b)(1)(i) of this
section for the first plan year beginning on or after January 1, 1998,
and must continue to comply with the requirements of paragraph (b)(1)(i)
of this section until the plan satisfies the requirements in this
paragraph (f). In no event is the exemption of this paragraph (f)
effective until 30 days after the notice requirements in paragraph
(f)(3) of this section are satisfied. If the requirements of this
paragraph (f) are satisfied with respect to a plan, the exemption
continues in effect (at the plan's discretion) until December 31, 2004,
even if the plan subsequently purchases a different policy from the same
or a different issuer and regardless of any other changes to the plan's
benefit structure.
    (2) Calculation of the one-percent increase--(i) Ratio. A group
health plan (or group health insurance coverage) satisfies the
requirements of this paragraph (f)(2) if the application of paragraph
(b)(1)(i) of this section to the plan (or to such coverage) results in
an increase in the cost under the plan (or

[[Page 667]]

for such coverage) of at least one percent. The application of paragraph
(b)(1)(i) of this section results in an increased cost of at least one
percent under a group health plan (or for such coverage) only if the
ratio below equals or exceeds 1.01000. The ratio is determined as
follows:
    (A) The incurred expenditures during the base period, divided by,
    (B) The incurred expenditures during the base period, reduced by--
    (1) The claims incurred during the base period that would have been
denied under the terms of the plan absent plan amendments required to
comply with this section; and
    (2) Administrative expenses attributable to complying with the
requirements of this section.
    (ii) Formula. The ratio of paragraph (f)(2)(i) of this section is
expressed mathematically as follows:
    (A) IE means the incurred expenditures during the base period.
    (B) CE means the claims incurred during the base period that would
have been denied under the terms of the plan absent plan amendments
required to comply with this section
    (C) AE means administrative costs related to claims in CE and other
administrative costs attributable to complying with the requirements of
this section.
    (iii) Incurred expenditures. Incurred expenditures means actual
claims incurred during the base period and reported within two months
following the base period, and administrative costs for all benefits
under the group health plan, including mental health benefits and
medical/surgical benefits, during the base period. Incurred expenditures
do not include premiums.
    (iv) Base period. Base period means the period used to calculate
whether the plan may claim the one-percent increased cost exemption in
this paragraph (f). The base period must begin on the first day in any
plan year that the plan complies with the requirements of paragraph
(b)(1)(i) of this section and must extend for a period of at least six
consecutive calendar months. However, in no event may the base period
begin prior to September 26, 1996 (the date of enactment of the Mental
Health Parity Act (Pub. L. 104-204, 110 Stat. 2944)).
    (v) Rating pools. For plans that are combined in a pool for rating
purposes, the calculation under this paragraph (f)(2) for each plan in
the pool for the base period is based on the incurred expenditures of
the pool, whether or not all the plans in the pool have participated in
the pool for the entire base period. (However, only the plans that have
complied with paragraph (b)(1)(i) of this section for at least six
months as a member of the pool satisfy the requirements of this
paragraph (f)(2).) Otherwise, the calculation under this paragraph
(f)(2) for each plan is calculated by the plan administrator (or issuer)
based on the incurred expenditures of the plan.
    (vi) Examples. The rules of this paragraph (f)(2) are illustrated by
the following examples:

    Example 1. (i) A group health plan has a plan year that is the
calendar year. The plan satisfies the requirements of paragraph
(b)(1)(i) of this section as of January 1, 1998. On September 15, 1998,
the plan determines that $1,000,000 in claims have been incurred during
the period between January 1, 1998 and June 30, 1998 and reported by
August 30, 1998. The plan also determines that $100,000 in
administrative costs have been incurred for all benefits under the group
health plan, including mental health benefits. Thus, the plan determines
that its incurred expenditures for the base period are $1,100,000. The
plan also determines that the claims incurred during the base period
that would have been denied under the terms of the plan absent plan
amendments required to comply with this section are $40,000 and that
administrative expenses attributable to complying with the requirements
of this section are $10,000. Thus, the total amount of expenditures for
the base period had the plan not

[[Page 668]]

been amended to comply with the requirements of paragraph (b)(1)(i) of
this section are $1,050,000 ($1,100,000 - ($40,000 + $10,000) =
$1,050,000).
    (ii) In this Example 1, the plan satisfies the requirements of this
paragraph (f)(2) because the application of this section results in an
increased cost of at least one percent under the terms of the plan
($1,100,000/$1,050,000 = 1.04762).
    Example 2. (i) A health insurance issuer sells a group health
insurance policy that is rated on a pooled basis and is sold to 30 group
health plans. One of the group health plans inquires whether it
qualifies for the one-percent increased cost exemption. The issuer
performs the calculation for the pool as a whole and determines that the
application of this section results in an increased cost of 0.500
percent (for a ratio under this paragraph (f)(2) of 1.00500) for the
pool. The issuer informs the requesting plan and the other plans in the
pool of the calculation.
    (ii) In this Example 2, none of the plans satisfy the requirements
of this paragraph (f)(2) and a plan that purchases a policy not
complying with the requirements of paragraph (b)(1)(i) of this section
violates the requirements of this section. In addition, an issuer that
issues to any of the plans in the pool a policy not complying with the
requirements of paragraph (b)(1)(i) of this section violates the
requirements of this section.
    Example 3. (i) A partially insured plan is collecting the
information to determine whether it qualifies for the exemption. The
plan administrator determines the incurred expenses for the base period
for the self-funded portion of the plan to be $2,000,000 and the
administrative expenses for the base period for the self-funded portion
to be $200,000. For the insured portion of the plan, the plan
administrator requests data from the insurer. For the insured portion of
the plan, the plan's own incurred expenses for the base period are
$1,000,000 and the administrative expenses for the base period are
$100,000. The plan administrator determines that under the self-funded
portion of the plan, the claims incurred for the base period that would
have been denied under the terms of the plan absent the amendment are $0
because the self-funded portion does not cover mental health benefits
and the plan's administrative costs attributable to complying with the
requirements of this section are $1,000. The issuer determines that
under the insured portion of the plan, the claims incurred for the base
period that would have been denied under the terms of the plan absent
the amendment are $25,000 and the administrative costs attributable to
complying with the requirements of this section are $1,000. Thus, the
total incurred expenditures for the plan for the base period are
$3,300,000 ($2,000,000 + $200,000 + $1,000,000 + $100,000 = $3,300,000)
and the total amount of expenditures for the base period had the plan
not been amended to comply with the requirements of paragraph (b)(1)(i)
of this section are $3,273,000 ($3,300,000-($0 + $1,000 + $25,000 +
$1,000) = $3,273,000).
    (ii) In this Example 3, the plan does not satisfy the requirements
of this paragraph (f)(2) because the application of this section does
not result in an increased cost of at least one percent under the terms
of the plan ($3,300,000/$3,273,000 = 1.00825).

    (3) Notice of exemption--(i) Participants and beneficiaries--(A) In
general. A group health plan must notify participants and beneficiaries
of the plan's decision to claim the one-percent increased cost
exemption. The notice must include the following information:
    (1) A statement that the plan is exempt from the requirements of
this section and a description of the basis for the exemption;
    (2) The name and telephone number of the individual to contact for
further information;
    (3) The plan name and plan number (PN);
    (4) The plan administrator's name, address, and telephone number;
    (5) For single-employer plans, the plan sponsor's name, address, and
telephone number (if different from paragraph (f)(3)(i)(A)(3) of this
section) and the plan sponsor's employer identification number (EIN);
    (6) The effective date of the exemption;
    (7) The ability of participants and beneficiaries to contact the
plan administrator to see how benefits may be affected as a result of
the plan's claim of the exemption; and
    (8) The availability, upon request and free of charge, of a summary
of the information required under paragraph (f)(4) of this section.
    (B) Use of summary of material reductions in covered services or
benefits. A plan may satisfy the requirements of paragraph (f)(3)(i)(A)
of this section by providing participants and beneficiaries (in
accordance with paragraph (f)(3)(i)(C) of this section) with a summary
of material reductions in covered services or benefits required under
Sec. 2520.104b-3(d) that also includes the information of this
paragraph (f)(3)(i). However, in all cases, the exemption is

[[Page 669]]

not effective until 30 days after notice has been sent.
    (C) Delivery. The notice described in this paragraph (f)(3)(i) is
required to be provided to all participants and beneficiaries. The
notice may be furnished by any method of delivery that satisfies the
requirements of section 104(b)(1) of ERISA (e.g., first-class mail). If
the notice is provided to the participant at the participant's last
known address, then the requirements of this paragraph (f)(3)(i) are
satisfied with respect to the participant and all beneficiaries residing
at that address. If a beneficiary's last known address is different from
the participant's last known address, a separate notice is required to
be provided to the beneficiary at the beneficiary's last known address.
    (D) Example. The rules of this paragraph (f)(3)(i) are illustrated
by the following example:

    Example. (i) A group health plan has a plan year that is the
calendar year and has an open enrollment period every November 1 through
November 30. The plan determines on September 15 that it satisfies the
requirements of paragraph (f)(2) of this section. As part of its open
enrollment materials, the plan mails, on October 15, to all participants
and beneficiaries a notice satisfying the requirements of this paragraph
(f)(3)(i).
    (ii) In this Example, the plan has sent the notice in a manner that
complies with this paragraph (f)(3)(i).

    (ii) Federal agencies--(A) Church plans. A church plan (as defined
in section 414(e) of the Internal Revenue Code) claiming the exemption
of this paragraph (f) for any benefit package must provide notice to the
Department of the Treasury. This requirement is satisfied if the plan
sends a copy, to the address designated by the Secretary in generally
applicable guidance, of the notice described in paragraph (f)(3)(i) of
this section identifying the benefit package to which the exemption
applies.
    (B) Group health plans subject to Part 7 of Subtitle B of Title I of
ERISA. A group health plan subject to Part 7 of Subtitle B of Title I of
ERISA, and claiming the exemption of this paragraph (f) for any benefit
package, must provide notice to the Department of Labor. This
requirement is satisfied if the plan sends a copy, to the address
designated by the Secretary in generally applicable guidance, of the
notice described in paragraph (f)(3)(i) of this section identifying the
benefit package to which the exemption applies.
    (C) Nonfederal governmental plans. A group health plan that is a
nonfederal governmental plan claiming the exemption of this paragraph
(f) for any benefit package must provide notice to the Department of
Health and Human Services (HHS). This requirement is satisfied if the
plan sends a copy, to the address designated by the Secretary in
generally applicable guidance, of the notice described in paragraph
(f)(3)(i) of this section identifying the benefit package to which the
exemption applies.
    (4) Availability of documentation. The plan (or issuer) must make
available to participants and beneficiaries (or their representatives),
on request and at no charge, a summary of the information on which the
exemption was based. An individual who is not a participant or
beneficiary and who presents a notice described in paragraph (f)(3)(i)
of this section is considered to be a representative. A representative
may request the summary of information by providing the plan a copy of
the notice provided to the participant under paragraph (f)(3)(i) of this
section with any individually identifiable information redacted. The
summary of information must include the incurred expenditures, the base
period, the dollar amount of claims incurred during the base period that
would have been denied under the terms of the plan absent amendments
required to comply with paragraph (b)(1)(i) of this section, the
administrative costs related to those claims, and other administrative
costs attributable to complying with the requirements of this section.
In no event should the summary of information include any individually
identifiable information.
    (g) Special rules for group health insurance coverage--(1) Sale of
nonparity policies. An issuer may sell a policy without parity (as
described in paragraph (b) of this section) only to a plan that meets
the requirements of paragraphs (e) or (f) of this section.

[[Page 670]]

    (2) Duration of exemption. After a plan meets the requirements of
paragraph (f) of this section, the plan may change issuers without
having to meet the requirements of paragraph (f) of this section again
before December 31, 2004.
    (h) Effective dates--(1) In general. The requirements of this
section are applicable for plan years beginning on or after January 1,
1998.
    (2) Limitation on actions. (i) Except as provided in paragraph
(h)(3) of this section, no enforcement action is to be taken by the
Secretary against a group health plan that has sought to comply in good
faith with the requirements of section 712 of the Act, with respect to a
violation that occurs before the earlier of--
    (A) The first day of the first plan year beginning on or after April
1, 1998; or
    (B) January 1, 1999.
    (ii) Compliance with the requirements of this section is deemed to
be good faith compliance with the requirements of section 712 of Part 7
of Subtitle B of Title I of ERISA.
    (iii) The rules of this paragraph (h)(2) are illustrated by the
following examples:

    Example 1. (i) A group health plan has a plan year that is the
calendar year. The plan complies with section 712 of Part 7 of Subtitle
B of Title I of ERISA in good faith using assumptions inconsistent with
paragraph (b)(6) of this section relating to weighted averages for
categories of benefits.
    (ii) In this Example 1, no enforcement action may be taken against
the plan with respect to a violation resulting solely from those
assumptions and occurring before January 1, 1999.
    Example 2. (i) A group health plan has a plan year that is the
calendar year. For the entire 1998 plan year, the plan applies a
$1,000,000 annual limit on medical/surgical benefits and a $100,000
annual limit on mental health benefits.
    (ii) In this Example 2, the plan has not sought to comply with the
requirements of section 712 of the Act in good faith and this paragraph
(h)(2) does not apply.

    (3) Transition period for increased cost exemption--(i) In general.
No enforcement action will be taken against a group health plan that is
subject to the requirements of this section based on a violation of this
section that occurs before April 1, 1998 solely because the plan claims
the increased cost exemption under section 712(c)(2) of Part 7 of
Subtitle B of Title I of ERISA based on assumptions inconsistent with
the rules under paragraph (f) of this section, provided that a plan
amendment that complies with the requirements of paragraph (b)(1)(i) of
this section is adopted and effective no later than March 31, 1998 and
the plan complies with the notice requirements in paragraph (h)(3)(ii)
of this section.
    (ii) Notice of plan's use of transition period. (A) A group health
plan satisfies the requirements of this paragraph (h)(3)(ii) only if the
plan provides notice to the applicable federal agency and posts such
notice at the location(s) where documents must be made available for
examination by participants and beneficiaries under section 104(b)(2) of
ERISA and the regulations thereunder (29 CFR 2520.104b-1(b)(3)). The
notice must indicate the plan's decision to use the transition period in
paragraph (h)(3)(i) of this section by 30 days after the first day of
the plan year beginning on or after January 1, 1998, but in no event
later than March 31, 1998. For a group health plan that is a church
plan, the applicable federal agency is the Department of the Treasury.
For a group health plan that is subject to Part 7 of Subtitle B of Title
I of ERISA, the applicable federal agency is the Department of Labor.
For a group health plan that is a nonfederal governmental plan, the
applicable federal agency is the Department of Health and Human
Services. The notice must include--
    (1) The name of the plan and the plan number (PN);
    (2) The name, address, and telephone number of the plan
administrator;
    (3) For single-employer plans, the name, address, and telephone
number of the plan sponsor (if different from the plan administrator)
and the plan sponsor's employer identification number (EIN);
    (4) The name and telephone number of the individual to contact for
further information; and
    (5) The signature of the plan administrator and the date of the
signature.
    (B) The notice must be provided at no charge to participants or
their representative within 15 days after receipt

[[Page 671]]

of a written or oral request for such notification, but in no event
before the notice has been sent to the applicable federal agency.
    (i) Sunset. This section does not apply to benefits for services
furnished on or after December 31, 2004.

[62 FR 66957, Dec. 22, 1997. Redesignated at 65 FR 82142, Dec. 27, 2000;
as amended at 67 FR 60861, Sept. 27, 2002; 68 FR 18049, Apr. 14, 2003;
69 FR 3817, Jan. 26, 2004]

The Regulations were Restated December 13, 2006


back to AutismNews.Net
back to Insurance law update
back to Parity discussion
sponsor