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DOL Issues Guidance to Employers on Use of MLR Rebates - December 5, 2011

On Friday the DOL issued Technical Release No. 2011-04 providing guidance to employers who receive rebates from their health insurance carriers due to the carriers' failure to meet required medical loss ratios under the Affordable Care Act.  According to the DOL's guidance, rebates received by an employer may be plan assets which must be used for the exclusive benefit of plan participants. Employers should review the terms of their insurance policies and governing plan documents, as well as their contribution percentages, to determine whether all or a portion of any rebates received will be considered plan assets. In addition to being used for the exclusive benefit of plan participants, plan assets must also be held in trust. In Friday's guidance the DOL extended the trust exemption for cafeteria plans and certain other contributory welfare plans to rebates received by employers who rely on this trust exemption to the extent the rebates are used within three months of receipt.