New FAQ Focuses on Grandfathered Status

April 1, 2011 ( – The Employee Benefits Security Administration (EBSA) has issued its sixth set of answers to “frequently asked questions” (FAQs) about the implementation of the Patient Protection and Affordable Care Act (PPACA).


This particular FAQ update, developed jointly with the departments of Treasury and Health and Human Services, outlined a number of circumstances that might cause a plan to lose it’s “grandfathered” status under the new federal health care law.  Among the six questions dealt with in this particular FAQ were what constitutes a “bona fide employment-based reason” for employees enrolled in a benefit package that is being eliminated to be transferred into another benefit package, as well as how a change in classification of a prescription drug as generic might impact a plan’s grandfather status.

The FAQ also deals with situations where:

  • A plan operating on a calendar plan year is considering an amendment to plan terms that will cause it to relinquish grandfather status, but wants the amendment to become effective before the first day of the next plan year.
  • A plan covers both retirees and active employees and is subject to the market reform requirements of the Affordable Care Act, but as the cost of coverage increases over time, how it will be determined whether the employer’s contribution rate has decreased for purposes of maintaining grandfather status.

The FAQ is available online at