New Proposed Regulations for Fertility Benefits and IVF Access
The Department of the Treasury, alongside the Internal Revenue Service (IRS), the Department of Labor, and the Department of Health and Human Services, has put forth proposed regulations to amend 26 CFR Part 54. These changes are intended to revise the Employee Retirement Income Security Act (ERISA) and the Public Health Service (PHS) Act, specifically designating certain fertility benefits as "limited excepted benefits." This classification would exempt these benefits from several market regulations under Chapter 100 of the Internal Revenue Code, Part 7 of ERISA, and Title XXVII of the PHS Act.
The introduction of these proposed regulations is a response to declining fertility rates in the United States, aligning with Executive Order 14216, which seeks to enhance access to in vitro fertilization (IVF). This executive directive aims to dismantle regulatory barriers and make IVF treatments more affordable. Additionally, the regulations echo Executive Order 14192's drive for deregulation to ease undue burdens.
Current Health Plan Coverage Limitations
Most employer-sponsored major medical health plans historically exclude fertility treatments. When coverage is provided, it is often administered separately from primary medical coverage. The proposed changes aim to fill existing gaps in coverage for infertility diagnosis and treatment by classifying specific fertility benefits as limited exceptions, potentially reducing the compliance burden for employers offering these benefits.
The legal foundation for this regulatory shift is found in Internal Revenue Code Section 9832(c)(2)(C), allowing the Departments to define limited benefits in regulations. The proposed amendments would introduce a new section, Prop. Treas. Reg. § 54.9831-1(c)(3)(ix), recognizing these fertility benefits as excepted benefits.
Under the proposed classification, fertility benefits must be offered under a separate insurance policy or as a non-integral component of a major medical plan. They must adhere to specific criteria regarding benefit scope, financial limits, and notification requirements. Prop. Treas. Reg. § 54.9831-1(c)(3)(ix)(A) mandates that coverage address infertility or related conditions, administered by qualified medical professionals.
Financial and Compliance Considerations
To maintain their classification as limited benefits distinct from dental or vision coverage, there is a proposed financial cap. Prop. Treas. Reg. § 54.9831-1(c)(3)(ix)(B) sets a lifetime benefit cap of $120,000 per participant, adjustable for medical inflation after December 31, 2027. If benefits are exhausted, no further coverage would be available under this classification.
For self-funded plans without separate policies, benefits must not be integral to a primary plan. Prop. Treas. Reg. § 54.9831-1(c)(3)(ix)(C) states that fertility benefits are non-integral if the plan sponsor offers other group health plans not limited to excepted benefits. Participants must have the option to decline other group health coverages, enabling them to select fertility benefits even with coverage elsewhere.
Plan sponsors must ensure adherence to related disclosure rules. Prop. Treas. Reg. § 54.9831-1(c)(3)(ix)(D) necessitates written notices to eligible participants, detailing coverage summaries and instructions for benefit utilization and claim submission.
The proposed provisions are expected to apply to plan years beginning on or after January 1, 2027. Presently, there is no guidance for early reliance on these regulations. However, stakeholders are encouraged to comment on whether these rules should become effective immediately upon final rule publication, providing immediate flexibility for insurers and employers. Tax professionals must caution clients about the compliance risks of using this classification before final regulations are issued.