The Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Affordability Reconciliation Act of 2010, does indeed carry an impact on executive compensation. For plan years which start on or after the date which is six months after the date of enactment (for calendar year plans this mean an effective date of January 1, 2011), the nondiscrimination requirements of IRC Section 105(h)(2) which prohibit discrimination in favor of highly compensated individuals will apply to both insured as well as self-insured group health plans (grandfathering may apply). What does this mean from a practical perspective? It is not uncommon for an executive employment agreement to provide that upon a termination without cause, post-employment healthcare will be provided to the executive at the same level of benefits as at the time of his or her termination and for many years following termination (in excess of the COBRA period).

Although the Section 105(h) rules have primarily applied in the self-insured plan context, the application to an insured arrangement will be new. Employers often satisfy the post-retirement healthcare obligation to executives by purchasing a separate policy. If such policy (think "plan") would now be subject to nondiscrimination testing, it would fail with respect to coverage eligibility. Failure results in unwanted tax consequences. With careful planning, design alternatives may be possible (current employment agreements may need modification).

Another executive compensation nugget from the new healthcare law: Starting in 2013, there will be a $500,000 deduction limit for current and deferred compensation (with respect to services performed after 2009) for officers, directors, and employees of health insurance providers. Think "TARP" for health insurers. However, controlled group aggregation rules under IRC Section 414 apply, so the breadth of this new rule may be quite expansive. An unusual provision buried in this section of the law also specifies that health insurers are required to apply the $500,000 deduction limit to compensation paid to "service providers."