Let s Wrap This Up! Understanding the Basics of Health & Welfare Plan Document Requirements

Transcription

1 Let s Wrap This Up! Understanding the Basics of Health & Welfare Plan Document Requirements Presented by: Caroline E. Smith, Esq., VP Compliance, AssuredPartners, Inc. Jeweleen T. Hartzfeld, CHRS, SHRM-CP, PHR, Corporate Compliance Officer, TJS Insurance Group (an AssuredPartners Company) C O N S U L T I N G B R O K E R A G E A D M I N I S T R A T I O N C O M M U N I C A T I O N S C O M P L I A N C E E M P L O Y E E A D V O C A C Y

2 About the Webinar Lines Are Muted Use Arrow To Minimize Menu View Slides in Full Screen Mode Enter Questions for Q&A Session

3 HRCI & SHRM Pre-Approved In order to receive the HRCI* & SHRM** Credits: Must have signed in with your unique registration link Must attend the entirety of the webinar Must answer the applicable polls for HRCI credits An HRCI certificate with ID# will be sent to you upon completion of all of the above Make sure to add apbenefitadvisors.com to your whitelist/safe senders list to receive all follow-up s *The use of this seal confirms that this activity has met HR Certification Institute s (HRCI ) criteria for recertification credit pre-approval. **AP Benefit Advisors, LLC is recognized by SHRM to offer Professional Development Credits (PDCs) for SHRM-CP or SHRM-SCP. This program is valid for 1 PDC for the SHRM-CP or SHRM-SCP. For more information about certification or recertification, please visit shrmcertification.org.

4 Today s Learning Objectives & Agenda Upon completion of this webinar, participants should be able to: In general, know what documents are needed for a DOL audit Understand the Basics of ERISA Identify the Key Compliance Requirements for ERISA Understand Plan Docs, SPDs and Wraps Recognize Employer Responsibilities, Penalties, Distribution Requirements Comprehend the basics of Section 125 Explain POPs vs. Cafeteria Plans Understand the reason for Nondiscrimination Testing (NDT) Know how to access various resources

5 Acronyms & Abbreviations ACA Affordable Care Act ALE Applicable Large Employer EHB Essential Health Benefits ERISA - Employee Retirement Income Security Act of 1974 DCAP Dependent Care Assistance Program GHP Group Health Plan Health FSA Health Flexible Spending Arrangement / Account HRA Health Reimbursement Arrangement / Account HSA Health Saving Arrangement /Account POP Premium Plan Only QMCSO Qualified Medical Child Support Order SBC Summary of Benefits and Coverage SCOTUS Supreme Court of The United States SMM- Summary Material Modification SPD Summary Plan Description

6 Would you be prepared to provide DOL with the proper plan documents for your benefit plans? 8 pages total 22 numbered items 60 questions

7 Overview of the Act ERISA Employee Retirement Income Security Act of 1974 ERISA is a Federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. The governing body that enforces the provisions of ERISA is the DOL through its Employee Benefits Security Administration (EBSA). ERISA is divided into four Titles: Title I, called Protection of Employee Benefit Rights, applies to employee welfare benefit plans (as defined in ERISA 3(1)). Title I of ERISA, in turn, is divided into seven parts Five of those parts apply to and impose requirements on employee welfare benefit plans : Part 1 (ERISA ) - Reporting and Disclosure Part 4 (ERISA ) - Fiduciary Responsibility Part 5 (ERISA ) - Administration and Enforcement Part 6 (ERISA ) - COBRA Continuation Coverage and Additional Standards for Group Health Plans Part 7 (ERISA ) - Group Health Requirements Ex. HIPAA, Newborns and Mothers Health Protection Act, Mental Health Parity Act and Women s Health and Cancer Rights Act, etc.

8 Who is subject to ERISA? All private sector employers of all business types who maintain welfare benefit and/or retirement plans for their employees. This includes Corporations, S Corporations, Partnerships, LLCs, Sole proprietors, Nonprofits No small employer exception from general ERISA compliance Exception for governmental employers and church plans

9 Question #1 Who is subject to ERISA? a. Only employers with over 50 employees b. Only employers with over 100 employees c. ALL employers with NO Exceptions d. ALL employers with very specific, limited exception

10 How is an Employee Welfare Benefit Plan defined? ERISA s application requires the existence of one or more ERISA plans. If an employer has no ERISA plans, it is not subject to ERISA. The ERISA definition of employee welfare benefit plan is made up of four basic elements: There must be a plan, fund, or program; That is established or maintained by an employer; For the purpose of providing specifically listed benefits, through the purchase of insurance or otherwise; To participants and their beneficiaries.

11 Which types of plans are subject to ERISA? Pension Plans Welfare Benefit Plans Including but not limited to: Medical / Health Insurance Dental Vision Disability Insurance Health FSA HRA EAP and Wellness Program - if medical care is provided Group Term Life Insurance Many fringe benefits are NOT covered by ERISA Including but not limited to: Section 125 Premium Only Plans Dependent Care Assistance Programs Transportation plans (parking/transit) Stop Loss HSA Pet Insurance Adoption Assistance Plans Tuition Reimbursement

12 ERISA Plan or Voluntary Plan? A health or welfare plan is subject to ERISA if it is established or maintained by the employer Requires the employer to be involved with the benefit to more than a minimal degree Voluntary Plan Safe Harbor Applies to Group or Group-Type Insurance Arrangements Employer may NOT: Contribute towards the cost of the coverage Receive payment for granting insurer access to workplace Endorse the program * Require employee participation Perform recordkeeping functions Allow payroll deductions to be made on a pre-tax basis *The sole function of the employer is to allow the insurer to advertise the plan, collect premiums thought payroll and remit them to the insurer (no endorsement) of the program

13 ERISA Key Compliance Requirements Once you determine that you have plan(s) that are subject to ERISA: You are required to have a written plan document. Plan must be established and maintained pursuant to a written instrument. An ERISA plan CAN still exist without a written plan document (i.e. you do not get out of compliance with ERISA simply by not drafting a written plan) You are required to have a summary plan description. Under Section 102 of ERISA, you are required to have ERISA plans summarized for participants and beneficiaries in an SPD written in plain language. (6 th grade level) Primary Function is communication. Legal rules provide the structure in which primary function is achieved SPD language is often very important in benefit claims and other plan litigation because this is the document that is given to the plan participants

14 Question #2 Generally, the Certificate/Policy/Benefit Booklets provided to you by your medical carriers/tpas will be enough to satisfy ERISA s plan document and SPD requirements? a. Yes b. No

15 Plan Doc Provisions Legalese (some examples) Original plan date Rescission of coverage No guarantee of employment Indemnification Restatement date Medicare Secondary Payer Procedure for terminating/amending the plan Use of Medical Loss Ratio Supersedes prior Subrogation/reimbursement terms Construction/governing law Signature Named Fiduciary and duties Erroneous payments Medicaid eligibility Dependent definition Disclosure regarding other federal mandates and laws Proof of dependent eligibility what may be required Conformity to applicable laws Payment of plan expenses Non-assignment of benefits Waiting period Administration Appointment of personal representative Procedure for allocating responsibility No guarantee of tax consequences Distribution of assets on plan termination Coverage termination date Coverage effective date Delegation Discretionary authority to interpret Contributions FMLA and other continuation Supports participating employer arrangement Employee definition, including the number of hours an employee must work COBRA and USERRA provisions Special enrollment/nondiscrimination HIPAA privacy and security Precedence if conflict between documents Time limit for filing lawsuit Funding How payments are made

16 SPD Provisions Plan Language (some examples) Plan name (and plan s common name, if different than plan name) Employer name and address Plan sponsor's Employer Identification number Plan records period Plan eligibility (Applicable Large Employers should include regarding their method of tracking hours) Carriers /TPAs name and address different than plan name) Wellness alternative means statement, if applicable Sources of contribution to the plan and method by which the amount of contribution is calculated Identity of any funding medium used for the accumulation of assets through which benefits are provided Plan number, Plan year and Effective Date ERISA Rights statement Claims filing/appeals procedures Type of plan Type of plan administration Offer of language assistance if large non- English group Qualified Medical Child Support Orders procedures on request Benefits/exclusions, network, utilization mgmt. What's included in the plan/benefit plan provisions Plan administrator's name and address Minimum hospital stay after childbirth Allocation Policy for Insurance Refunds, etc. Trustee name, title, and address if a trust exists Information about the Cafeteria Plan if contributions are made through one Circumstances causing a loss of benefits Responsible party for payment Any collective bargaining agreement Continuation/conversion Name and address of agent for legal service Statement that service of legal process may be made upon the plan trustee or administrator Identity of insurer(s), if any Plan s policy regarding overpaid or erroneously paid benefits Date of the end of the plan year for maintaining the plan s fiscal records Disclosures relating to COBRA, Other Continuation Rights, Other Federal Mandates, and Health Care Reform

17 Employer Setup Options Option One Separate Plan Doc and Separate SPD for each benefit Plan terms appearing in a separate plan document with a corresponding SPD summarizing that document Option Two Combine all ERISA benefits under one document - Wrap Plan Document and Separate SPD Single document serving as plan document for all ERISA Health and Welfare Benefits with a separate SPD for Wrap Option Three Combine all ERISA benefits under one Plan/SPD Combination Document Wrap Plan Document & SPD Single document serving as both plan and SPD for all ERISA Health and Welfare Benefits. If this single document is used, it needs to specifically and prominently state that it is intended to serve as both the plan document and SPD (and terms should not be used in the document to suggest that any separate or secondary plan document exists). Wrap/Mega Wrap documents can help achieve several objectives: Supplies ERISA-required or otherwise desirable content not included in other documents Reduces number of plans and identifies how many plans the employer maintains, which is important for Form 5500 reporting (filing one Form 5500 vs. multiple) Clarifies administrative roles

18 Plan Doc SPD Wrap/Mega Wrap Plan Document A plan document is the official governing document for the plan. (ERISA) requires that it include the plan s terms for a number of items including eligibility, benefits, exclusions, a named fiduciary and plan administrator, claims and appeals procedures, funding information, and other items. In most situations, a group insurance policy or certificate will not include all of the required information and so will not qualify as a plan document. SPD The most important document under ERISA An SPD is the document provided to participants to explain their rights and obligations under the plan. It is intended to provide a summary of the plan s terms and should be written in a way the average participant can understand it. However, it has become increasingly common for plans to use a combination plan document/spd. (If the plan document and SPD are separate and the participant requests a copy of the plan document, the plan sponsor must provide the plan document within 30 days after it is requested, even though an SPD has already been provided.) The group insurance policy or certificate is not an SPD. Wrap / Mega Wrap A wrap document is a plan doc, or a combo plan doc/spd, that is designed to include all of the information required by ERISA. It is a customized document that wraps around supplements, and coordinates other documents describing the benefits to ensure ERISA requirements are being met. Many employers use a wrap doc that includes all or most of their group benefits, like medical, dental, and life benefits. This is sometimes called a mega-wrap. Mega-wraps then serve to both combine multiple benefits into a single plan, and to provide ERISA requirements to the insurance policies.

19 Employer Responsibilities Who is responsible for the Plan Docs / SPDs, etc.? Plan Administrator This is the person or entity designated as such in plan documents; or, if no one is designated, the plan sponsor Plan administrators must be identified in the SPD Generally, plan administrators cannot avoid liability, even if attempt to delegate to someone else Most TPAs are not responsible under ERISA for items such as these (SPD, etc.) Insurers are not responsible (although often provide their own materials) Understanding Your Fiduciary Responsibilities Under a Group Health Plan

20 Who should receive the SPD/Wrap SPD? All participants covered under any ERISA welfare plan COBRA Qualified Beneficiaries Parent or guardian of child covered under a QMCSO Spouse/dependent of a deceased participant who is still receiving benefits Representative or guardian of Incapacitated Persons Reporting and Disclosure Guide for Employee Benefit Plans -

21 Question #3 Who is responsible for distributing the SPD/SMM? a. The Insurer b. The Plan Administrator c. The TPA d. A or C, depending if the plan is fully insured or self-funded

22 When should they be distributed? Within 120 day after new ERISA plan is established Within 90 days after beginning of individual s coverage Every 10 years if no material changes made Every 5 years if there have been material changes In addition, a Summary of Material Modification is required anytime there is a material modification in the terms of the plan or in the information required to be in the SPD In general furnish within 210 days after the plan year in which a modification or change is adopted Summary of Benefits and Coverage Notice Requirement any material modification of plan terms or coverage that is not in the most recent SBC other than in connection with a renewal must be issued in an SMM at least 60 days before it becomes effective. Note that if this is timely, it is in advance of ERISA s SMM requirement and would thus also satisfy that, as well. If considered a material reduction in covered services or benefits it must be disclosed no later than 60 days after the adoption of the modification or change DOL regulations provide many examples of what falls into this category

23 How can they be distributed? In Oct 2002, the DOL issued guidance on distribution - Delivery must be calculated to ensure actual receipt and full distribution Properly addressed first-class mail Second/Third-class mail (i.e. periodical/standard mail) - if return/forwarding postage is guaranteed and address correction is requested Special Inserts in Company/Union Publications only if certain requirements met Hand Delivery this does NOT include placing or posting copies in a location frequented by participants (note may be difficult to prove hand delivery occurred) Electronic Distribution special rules Electronic Distribution follow DOL s Safe Harbor 3 categories: Participants with work-related access may receive electronically Computer with access to employer s electronic information system as an integral part of duties Kiosks/computers in common areas do not meet standards Participants without work-related access who provide prior affirmative consent complex administration to comply may receive electronically Participants without work-related access who do NOT provide prior consent must use another distribution method

24 Question #4 I have a new hire who enrolled in benefits. This employee works in a manufacturing plant all day (no desk, computer, etc.). Under ERISA, I can: a. Send this employee the required SPD(s) by first class mail within 120 days of his coverage beginning b. the SPD(s) to him within 90 days of his coverage beginning c. Send this employee the required SPD(s) by first class mail or him copies if he provided proper prior consent to electronic delivery within 90 days of his coverage beginning d. Leave a copy of the SPD(s) in the area where he is known to take breaks

25 Penalties & Consequences ERISA Statutory Penalties $110 per day for failure to provide SPD within 30 days of written request by participant Applies if incomplete SPD is provided or not in compliance with electronic disclosure rules Penalty is discretionary with DOL and ultimately with federal judge Liability can be personal Violation of other ERISA and IRC Sections If Employer has certain required notices and disclosures in SPD and fails to provide it, may violate those other laws as well (e.g. COBRA, Newborns and Mothers Health Protection Act, etc.) Biggest Risk to Plan Sponsors for failure to provide SPD is participants claim for benefit entitlements based on faulty or nonexistent SPDs Very difficult, if not impossible, for a plan sponsor to enforce provisions appearing in the formal plan document if the provisions are not disclosed in an SPD (and distributed) as well.

26 Another Documentation Requirement IRC Section 125 In 1978, the US Congress created Code section 125 in an effort to make benefit programs more affordable for employees. Section 125 is part of the Internal Revenue Code that allows employees to convert a taxable cash benefit (salary) into non-taxable benefits. Under a Section 125 program you may choose to pay for qualified benefit premiums before any taxes are deducted from employee paychecks (i.e. on a pretax basis) Employee Savings (Note: Some workers are not able to participate) Employees can save 20-40% of their payroll deductions. The savings are on federal income taxes, including Social Security and Medicare (FICA), FUTA and RRTA, and generally on state and local taxes (check with state/local tax authorities). Employer Savings Employers save the matching Social Security (6.20%) and Medicare (1.45%) taxes, which equates to 7.65% (1.45% for municipalities) of all the dollars put through the plan - a substantial savings.

27 Section 125 Requirements Every employer who allows contributions on a pretax basis must have a plan document under IRC Section 125 (Code has a written document requirement) If there is no document, then the employer cannot offer benefits on a pre-tax basis If there is no document OR the document does not comply with content requirements, employees elections between taxable and nontaxable benefits will result in gross income to the employees no exceptions! Not the same requirement as the ERISA documentation requirements. This is a completely separate requirement under the IRC and a separate document! Plan Doc must contain certain items to meet the 125 requirements Description of Available benefits Participation Rules Election Procedures Manner of Contributions Maximum amount of salary reduction contributions available to any employee under the plan The Plan Year Provisions complying with PTO, Health FSAs, DCAPs, and Opt-outs, if applicable

28 Plan Doc vs. SPD for Cafeteria Plan Plan Doc for Cafeteria Plan SPD for Cafeteria Plan

29 Section 125 Cafeteria Plans Every employer that offers benefits on a pretax basis is going to have at least a basic Premium Only Plan (POP). If the employer offers flexible spending accounts through their 125 plan, it creates a creates a full Cafeteria Plan. The POP (aka Premium Conversion/Only Plan) is the building block of the Section 125 plan; this is the portion that allows you to pay group insurance premiums with pre-tax dollars. In addition, your POP is the foundation for all other tax savings plans such as Flexible Spending Accounts and Health Savings Accounts. By adding a health FSA &/or Dependent Care Assistance Plan (DCAP), the plan becomes the more traditional full Cafeteria Plan Cafeteria Plan

30 Section 125 Cafeteria Plans What Benefits can and cannot be offered? Only QUALIFED Benefits may be offered examples: Health/medical, dental, vision, and Rx coverage DCAP/Health FSA/HSA benefits Disability coverage (taxation of premium effects how benefits are taxed on payment) Hospital Indemnity/Cancer Insurance (taxation implications here, as well) Group Term Life Insurance (up to $50,000) PTO (vacation buy-up, etc.) What Benefits Cannot be Offered Under a 125 Plan? Educational Assistance Programs under Code 127 Other Fringe Benefits under Code 132 Spouse/Dependent Life Insurance MSAs and HRAs Long Term Care What about Opt-Outs/Coverage Waivers? Opt-outs should always run through the 125 Plan (i.e. there should be language/provisions detailing the opt-out arrangement). The Opt-out amount will always be taxable income to the participant Ensure that any arrangement is an Eligible Opt-out arrangement so that employees required contributions for determining affordability is not increased under the Employer Mandate

31 Nondiscrimination Testing (NDT) Whether you have a Cafeteria Plan with a Healthcare FSA Account (FSA) and/or a Dependent Care Assistance Plan (DCAP) or a Premium Only Plan (POP), the Internal Revenue Service (IRS) requires that the plans do not discriminate in favor of highly compensated individuals/key employees. To verify your plans are operating in a non-discriminatory fashion under the rules, you should be conducting annual Nondiscrimination Testing of the plans prior to the end of each plan year. Different tests required for different benefits/plans under certain Code Sections/Regulations (i.e. Sections 125, 129, 105(h), etc.) Testing ensures that the plans are not favoring highly compensated employees. Definition of Highly Compensated Employee/Individual and Key Employee as used in the tests are different Very difficult, if not impossible, to eyeball the tests testing based on total salaries and benefits offered and utilized by participants Sometimes your claims administrator/tpa will do some of these tests for you under your contract with them. BUT NOT ALWAYS! Penalties highly compensated individuals/employees can be taxed on contributions if plan is found to be discriminatory

32 Resources Overall General DOL Compliance Page Self-Compliance Tool Reporting and Disclosure Guide for Employee Benefit Plans Understanding Your Fiduciary Responsibilities Under A Group Health Plan

33 Question #5 Which employers must have a written Plan Document under Section 125? a. Only employers with over 100 employees who offer qualified benefits on a pre-tax basis b. Only employers who offer a Health Flexible Spending Account c. Only employers who offer a Health Flexible Spending Account and a Dependent Care Assistance Program d. All employers who offer qualified benefits on a pretax basis

34 Would you be prepared to provide DOL with the proper plan documents for your benefit plans? 8 pages total 22 numbered items 60 questions

35 Let s Wrap This Up Any Questions? Thank You! AssuredPartners, Inc. and its partner agencies strive to provide you with insurance and benefit related information that is both accurate and informative. Laws, regulations and circumstances change frequently, and similar situations or slight changes to laws and regulations can lead to entirely different results. The information contained in this webinar is for educational and informational purposes only, and, as such, you should always seek the advice of competent legal counsel for answers to your specific questions.