The Department of Labor (“DOL”) has published Frequently Asked Questions describing the scope of the anti-abuse rule (available here). Generally, transferring employees from one grandfathered plan or benefit package (transferor plan) to another (transferee plan) will cause the transferee plan to relinquish grandfather status if amending the transferor plan to replicate the terms of the transferee plan would have caused the transferor plan to relinquish grandfather status. An exception exists where the employer has a bona fide employment-based reason to transfer the employees.

The FAQs include the following non-exhaustive list of circumstances under which an employer might have a bona fide employment-based reason for transferring employees:

  1.  When a benefit package is being eliminated because the issuer is exiting the market;
  2. When a benefit package is being eliminated because the issuer no longer offers the product to the employer (for example, because the employer no longer satisfies the issuer’s minimum participation requirement);
  3. When low or declining participation by plan participants in the benefit package makes it impractical for the plan sponsor to continue to offer the benefit package;
  4. When a benefit package is eliminated from a multiemployer plan as agreed upon as part of the collective bargaining process; or
  5. When a benefit package is eliminated for any reason and multiple benefit packages covering a significant portion of other employees remain available to the employees being transferred.

The FAQs also describe the circumstances under which a plan can increase the level of cost sharing for brand-name drugs without losing its grandfathered status. The DOL also clarified that when a plan adopts an amendment that would cause the plan to lose its grandfathered status, the plan will cease to be a grandfathered health plan on the effective date of the amendment rather than on the date the employer adopts the amendment.

While the continuing barrage of health care reform guidance can be dizzying, it is important for employers to stay up-to-date on these evolving requirements. Additional guidance is also available at and