Compliance Checklist For Group Health Plans. Revised April 2, 2012

Transcription

1 Compliance Checklist For Group Health Plans Revised April 2, 2012

2 Page 2 of 33 This Compliance Checklist outlines general federal group health plan requirements, including certain federal mandates, plan reporting requirements, plan document requirements and required policies and procedures. This resource is divided into three sections: Compliance Checklist Quick Reference Guide: charts each requirement and the timeline for compliance Compliance Checklist for Group Health Issues: details each requirement, the penalty for failure to comply, citation of the regulation and applicability based on plan size Compliance Model Notices: provides text for model notices and language, which have been provided by federal regulations and guidance Please note that the Compliance Checklist: Contains limited information and is not a comprehensive list of group health plan requirements; therefore, it should not be relied upon as an employer s sole resource for compliance information. Includes information related to Health Care Reform provisions which are effective beginning in 2010 through Future versions will include upcoming Health Care Reform provisions scheduled for implementation in later years. Is a federal resource only, and therefore does not cover state mandates. Please check with your state s insurance board for local requirements. Is a proprietary NFP Benefits resource and is solely for the use of NFP and Benefits Partners member firms. National Financial Partners Corp. (NFP) and its subsidiaries do not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.

3 Page 3 of 33 Available Model Notices: Model Notice A: Model Notice B: Model Notice C: Model Notice D: Model Notice E: Model Notice F: Model Notice G: Model Notice H: Model Notice I: Model Notice J: Model Notice K: Model Notice L: Model Notice M: Model Notice N: Model Notice O: Model Notice P: Model Notice Q: Model Notice R: Model Notice S: Model Notice T: Model Notice U: Model Notice V: Model Notice W: Model Notice X: Model Notice Y: Model Notice Z: COBRA: Initial COBRA Notice COBRA: Election Notice ERISA: ERISA Rights Statement ERISA: Summary Annual Report (SAR) FMLA: General Notice FMLA: Eligibility & Rights and Responsibilities Notice FMLA: Designation Notice PPACA: Grandfathered Health Plans PPACA: Annual Notice of Waiver from the Annual Limit Requirement, for use with all plans except HRAs PPACA: Annual Notice of Waiver from the Annual Limit Requirement, for use with HRAs only PPACA: Notice of Adverse Benefit Determination PPACA: Notice of Final Internal Adverse Benefit Determination PPACA: Notice of Final External Review Decision PPACA: Patient Protections PPACA: Summary of Benefits and Coverage (SBC) HIPAA: Certificate of Creditable Coverage HIPAA: Notice of Special Enrollment Rights HIPAA: General Notice of Pre-existing Condition Exclusion HIPAA: Employer CHIP Notice MEDICARE: Part D Creditable Coverage Notice to Eligible Individuals MEDICARE: Part D Non-creditable Coverage Notice to Eligible Individuals GINA: EEOC Poster HSA: Notice to Employees Regarding Employer Contributions to HSA Newborns and Mothers Health Protection Act Model Language USERRA: Notice of Your Rights Under USERRA WHCRA: Women s Health and Cancer Rights Act Notice

4 Page 4 of 33 Quick Reference Guide Timeline for compliance of notice or other requirement Cafeteria Plans Page 8-10 Quarterly Annually Every 3 Years Every 5-10 Years As Required COBRA Coverage Termed Coverage Termed New Enrollee Newly Eligible Ongoing Cafeteria Plan Documents Upon Plan Changes Upon Request Cafeteria Plan Nondiscrimination Testing Health FSA Nondiscrimination Testing DCAP Nondiscrimination Testing Simple Cafeteria Plan Safe Harbor Health FSA Limit COBRA Pages Initial COBRA Notice COBRA Election Notice Notice of Unavailability of Continuation Coverage Notice of Early Termination of COBRA Coverage ERISA Pages Plan Documents Summary Plan Description (SPD) Summary of Material Modification (SMM) Summary of Material Reduction in Covered Services or Benefits Form 5500 Form 5500-SF Accountant s Report Summary Annual Report (SAR) FMLA Pages General FMLA Notice Eligibility Notice Rights and Responsibilities Notice

5 Page 5 of 33 Quick Reference Guide continued Timeline for compliance of notice or other requirement Quarterly Annually Every 3 Years Every 5-10 Years As Required COBRA Coverage Termed Coverage Termed New Enrollee Newly Eligible Ongoing Upon Plan Changes Upon Request FMLA Pages Designation Notice Notice of Opportunity to Change Health Plans Notice of Nonpayment Health Care Reform Pages Health Care Reform, March 23, 2010 Grandfathered Health Plans Nursing Mothers Health Care Reform, Annual Dollar Limits Annual Notice of Waiver from the Annual Dollar Limit Requirement Dependent Coverage Internal and External Appeal Procedures Lifetime Dollar Limits OTC Medicines or Drugs Patient Protections Preventive Care Mandate Pre-existing Condition Exclusion Rescission of Coverage Health Care Reform, Comparative Clinical Effectiveness Research Tax Exchange Notice Requirement Notice of Material Plan Modification Summary of Benefits and Coverage (SBC)

6 Page 6 of 33 Quick Reference Guide continued Timeline for compliance of notice or other requirement Health Care Reform Pages Quarterly Annually Every 3 Years Every 5-10 Years As Required COBRA Coverage Termed Coverage Termed New Enrollee Newly Eligible W-2 Reporting Requirement Ongoing Upon Plan Changes Upon Request HIPAA Pages HIPAA Portability Certificate of Creditable Coverage Notice of Special Enrollment Rights General Notice of Pre-existing Condition Exclusion Individual Notice of Pre-existing Condition Exclusion Employer CHIP Notice Wellness Program Requirements HIPAA Privacy Privacy Policies and Procedures Security Policies and Procedures Notice of Privacy Practices Breach Notifications Business Associate Agreement Medicare/TRICARE Pages Medicare Part D Disclosure Notice to CMS Medicare Part D Disclosure Notice to Eligible Individuals Medicare Section 111 Reporting Medicare Prohibitions TRICARE Prohibitions

7 Page 7 of 33 Quick Reference Guide continued Timeline for compliance of notice or other requirement Quarterly Annually Every 3 Years Every 5-10 Years As Required COBRA Coverage Termed Coverage Termed New Enrollee Newly Eligible Ongoing Upon Plan Changes Upon Request Nondiscrimination Pages Section 105(h) Nondiscrimination Testing HIPAA Nondiscrimination Rules for Eligibility and Benefits Cafeteria Plan, Health FSA and DCAP Nondiscrimination Testing Taxation Pages Taxation of Group Term Life Insurance Taxation of Same-sex Benefits Taxation of Dependents to Age 26 Other Federal Mandates Pages Genetic Information Nondiscrimination Act (GINA) HSA Notice to Employees Regarding Employer Contributions Mental Health Parity and Addiction Equity Act (MHPAEA) Newborns and Mothers Health Protection Act (NMHPA) Qualified Medical Child Support Order (QMCSO) Uniformed Services Employment and Reemployment Rights Act (USERRA) Women s Health and Cancer Rights Act (WHCRA)

8 Page 8 of 33 Cafeteria Plans Cafeteria Plan Documents Cafeteria Plan Nondiscrimination Testing Health FSA Nondiscrimination Testing Applies to every employer that permits to pay for benefits with pre-tax dollars. Must have a written document containing the operating rules of the plan, descriptions of each qualified benefit available (i.e., health premiums, health FSA, DCAP, group term life insurance, HSA, etc.), grace period availability, eligibility rules, manner of contributions, maximum employer and employee contributions, ordering rules, plan year, election procedures, timing of and irrevocability of participant elections, allowable qualified changes, claims and reimbursement procedures, substantiation rules, health FSA uniform coverage and use-it-or-lose-it rule (if applicable), run-out period description, and amendment procedure. Cafeteria plans provide tax advantages to. Accordingly, a cafeteria plan must not discriminate in favor of Highly compensated individuals as to eligibility to participate (the Eligibility Test); Highly compensated participants as to contributions and benefits (the Contributions and Benefits (C&B) Test); or Key as to concentration of benefits (the Key Employee Concentration Test). Note that the cafeteria plan will not cease to be a valid Code 125 plan just because it is discriminatory. The term highly compensated participant means a participant who is An officer; A shareholder owning more than 5 percent; Highly compensated; or A spouse, parent, child or grandchild of an individual described above. The term key employee means a participant who is An officer with annual compensation of $165,000 for 2012; More than 5 percent owner; and More than 1 percent owner with compensation over $150,000. Simple cafeteria plan safe harbor available for small. Health FSAs are subject to nondiscrimination testing under both Section 125 and Section 105(h). Please check with your advisor to determine strategies to assist with passing this test. Must be formally adopted on or before the first day of the first plan year. Compliance requirements are ongoing, but nondiscrimination testing must be performed as of the last day of the plan year. Compliance requirements are ongoing, but nondiscrimination testing must be performed as of the last day of the plan year. Prop. Treas. Reg (c), 26 USC 125(d), 26 USC 105, 26 USC 129 Code 125(b)(1) (b)(2) Code 416(i)(1) Code 105(h)(6) Prop. Treas. Reg (l) Failure to adopt plan document prior to the plan s effective date or failure to operate in compliance with the document or the regulations can result in disqualification of the plan s favorable tax status. A highly compensated participant or key employee participating in a discriminatory cafeteria plan must include in gross income the value of the taxable benefit with the greatest value that the employee could have elected to receive, even if the employee elects to receive only the nontaxable benefits offered. If the health FSA discriminates in favor of highly compensated individuals, then amounts considered to be excess reimbursements paid to them will be taxable.

9 Page 9 of 33 Cafeteria Plans continued DCAP Nondiscrimination Testing A dependent care assistance program (DCAP) may not favor highly compensated (HCEs) and must satisfy four specific nondiscrimination tests: Eligibility Test: A DCAP must not discriminate in favor of HCEs or their dependents as to eligibility to participate. Contributions and Benefits Test: A DCAP must not discriminate in favor of HCEs or their dependents as to contributions and benefits received under the plan. More-than-5 percent Owners Concentration Test: Not more than 25 percent of the amounts paid or incurred by the employer for dependent care for a plan year may be provided to shareholders or owners (or their spouses or dependents) who own more than 5 percent in the stock, capital or profits interest in the employer. 55 percent Average Benefits Test: The average DCAP benefits provided to the non-hces under all plans of the employer must be at least 55 percent of the average benefits provided to HCEs under all plans of the employer. In general, HCEs for purposes of DCAP testing are whose compensation during the preceding plan year exceeded the HCE dollar threshold for that year or who were more-than-5 percent owners in the current or preceding plan year. For 2012, the HCE dollar threshold is $115,000. Compliance requirements are ongoing. Code 129 Code 414(q) The consequence of failing to meet the requirements of the discrimination tests outlined in this section is that the highly compensated (HCEs) as defined in Code 414(q) lose their exclusion for DCAP reimbursements. Simple Cafeteria Plan Safe Harbor Health care reform allows eligible small to establish a simple cafeteria plan in order to exempt the plan from certain tests that are otherwise applicable under the cafeteria plan nondiscrimination rules. All with at least 1,000 hours of service must be eligible to participate, and must make certain employer contributions if they wish to elect this plan design. Available for plan years beginning on or after Jan. 1, PPACA, Pub. L. No , 9022(b) (2010) No penalty; plan design will exempt plan from nondiscrimination rules for cafeteria plans, health flexible spending accounts (FSAs) and dependent care assistance programs as long as contribution, eligibility and participation requirements are met. Available to with an average of 100 or fewer during either of the preceding two years. Special rules allow new and growing to keep the plan until they employ an average of 200 or more.

10 Page 10 of 33 Cafeteria Plans continued Health FSA Limit Health care reform imposes a $2,500 limit on annual salary reduction contributions to health FSAs offered under cafeteria plans. Nonelective employer contributions to health FSAs are not included in this limit. Grandfathered exemptions do not apply to this requirement, so all health FSAs offered under cafeteria plans must comply. The IRS is expected to issue further guidance on this issue prior to the effective date. Effective for all plans on Jan. 1, 2013, regardless if the plan is a calendar year or fiscal year plan. Code 125(i), as amended by PPACA, Pub. L. No (b) (2010) and HCERA, Pub. L. No (a) (2010). No specified penalty at this time. COBRA Initial COBRA Notice The Consolidated Omnibus Budget Reconciliation Act (COBRA) applies to group health plans sponsored by with 20 or more in the previous calendar year. Provides general information on COBRA rights. Should include plan name, address and telephone number, a general description of continuation coverage under the plan, a description of qualifying event notice requirements and plan procedures and a statement regarding contact information for more complete information. Model Notice A Must be distributed to new participants (and spouses) within 90 days of coverage begin date. ERISA 606(a)(1) DOL Reg Legal action may be brought by participant and an ERISA $110 per day fine may be assessed. If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928 and a civil penalty of $100 per day would be assessed. 20 or more COBRA Election Notice Notifies qualified beneficiaries of their right to continue coverage following a qualifying event. Should be written in plain language so that the average participant can understand. Must include the plan name, administrative contact name/address/telephone number, qualifying event, coverage termination date, qualified beneficiaries (QBs), statement that each QB has an independent right to elect continuation coverage, election procedures, election deadline, consequences of not electing coverage, coverage description, payment information and a statement that notice does not fully describe all rights and that more information can be obtained from the SPD. Model Notice B Employer has 30 days to notify plan administrator of qualifying event; plan administrator must distribute notice to covered, spouse and dependents within 14 days of employer notification. If employer and plan administrator are same, there is a combined 44 days for qualifying events in which the employer is required to provide notice (termination, reduction in hours, Medicare entitlement, retirement). Longer periods may apply for multiple employer plans. ERISA 606 DOL Reg (a-b) DOL Reg Legal action may be brought by participant and an ERISA $110 per day fine may be assessed. Additionally, employer may be held liable for any medical costs incurred by participant. If violation is not corrected within 30 days of discovery, then employer must self- report violation on IRS Form 8928, and a civil penalty of $100 per day will be assessed. 20 or more

11 Page 11 of 33 COBRA continued Notice of Unavailability of Continuation Coverage Provides explanation as to why individual is not entitled to continuation coverage. Should be written in plain language so that the average participant can understand. The plan administrator must provide the notice of unavailability within the time period that would apply for providing the election notice. This deadline is generally 14 days after the plan administrator has received notice of a qualifying event. See COBRA election notice for more information. DOL Reg (c) Legal action may be brought by participant and an ERISA $110 per day fine may be assessed. If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928 and a civil penalty of $100 per day will be assessed. 20 or more Notice of Early Termination of COBRA Coverage Notifies a qualified beneficiary that continuation coverage will terminate earlier than the maximum period. Should be written in plain language so that the average participant can understand. Must include the early termination date, reason for early termination and explanation of any conversion rights. Must be distributed to qualified beneficiary as soon as practicable following the administrator s determination that continuation coverage shall term. DOL Reg (d) Legal action may be brought by participant and an ERISA $110 per day fine may be assessed. If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928 and a civil penalty of $100 per day would be assessed. 20 or more ERISA Plan Documents The written instruments under which a benefit plan is established or operated. Must designate a named fiduciary, designate a plan administrator, the plan year, plan name and plan number, include a description of benefits and eligibility, how benefits will be funded, plan amendment and termination procedures, required provisions for group health plans, including COBRA, USERRA, HIPAA, QMCSOs, and subrogation and reimbursement clauses. Must be provided to participants and beneficiaries within 30 days of written request. ERISA 402 DOL Reg b-1(b) DOL Reg (g) Plan administrator could be subject to a penalty of up to $110 per day. Willful ERISA violations can carry up to 10 years in prison and $100,000 fine.

12 Page 12 of 33 ERISA continued Summary Plan Description (SPD) Summary of Material Modification (SMM) Summary of Material Reduction in Covered Services or Benefits Form 5500 Advises participants and beneficiaries of their rights and obligations under the plan. Should be written in plain language so that the average participant can understand. Must include plan name, employer name, type of plan, type of administration, plan administrator name/address/telephone number, legal agent name/address, plan eligibility requirements, summary of benefits, claims procedures, and Employee Retirement Income Security Act (ERISA) rights. Model language for ERISA Rights Statement provided in Model Notices section of this document under Model Notice C. Summarizes any material modification to the plan and any change in the information required to be in the SPD. Should be written in plain language so that the average participant can understand. Summarizes any modification or change to covered services or benefits that would be considered by the average participant to be an important reduction, such as eliminates or reduces benefits payable, increases amount to be paid by participant, reduces HMO service area, or creates new conditions or requirements for obtaining services or benefits. Applies to all welfare plans subject to ERISA. Serves as the annual reporting requirement under ERISA Title I. There is an exclusion for certain fringe benefit plans (group legal services, education assistance plans, adoption assistance programs) and welfare plans with less than 100 participants at the beginning of the plan year which are unfunded, fully insured, or a combination of unfunded and fully insured. Must be provided to participants and beneficiaries within 90 days of participation, within 120 days of plan effective date, every five years for an amended plan, and every 10 years for an unamended plan. Must be provided to participants and beneficiaries within 210 days of the end of the plan year in which the modification is adopted. Any SMMs that are not yet included in an SPD must be distributed along with the SPD until a revised SPD is distributed. Therefore, any outstanding SMMs must also meet the due date requirements of the SPD, which are listed above. Must be provided to participants and beneficiaries within 60 days of when change was adopted. Must be submitted electronically (along with the necessary schedules) to the Employee Benefits Security Administration (EBSA) by the last day of the seventh month following the end of the plan year, or by the extension due date, if Form 5558 is filed. ERISA 104(b) DOL Reg (a) DOL Reg DOL Reg b-2 ERISA 104(b) DOL Reg b-3 ERISA 104(b)(1)(B) DOL Reg b-3 ERISA 104(a)(1) ERISA 104(a)(3) DOL Reg USC 6039D IRS Bulletin Plan sponsor could be subject to a penalty of up to $110 per day if it does not provide within 30 days after an individual s written request. Willful ERISA violations can carry up to 10 years in prison and a $100,000 fine for individuals and fines up to $500,000 for companies. Plan sponsor could be subject to a penalty of up to $110 per day if it does not provide within 30 days after an individual s written request. Willful ERISA violations can carry up to 10 years in prison and a $100,000 fine for individuals and fines up to $500,000 for companies. Plan sponsor could be subject to a penalty of up to $110 per day if it does not provide within 30 days after an individual s written request. Willful ERISA violations can carry up to 10 years in prison and a $100,000 fine for individuals and fines up to $500,000 for companies. Both administrative and criminal penalties apply. Administrative penalties range from $25 per day to $1,100 per day. Willful violations can carry penalties up to 10 years in prison and a $100,000 fine. Small (less than 100 participants) unfunded, insured and combination welfare plans are exempt.

13 Page 13 of 33 ERISA continued Form SF Accountant s Report Summary Annual Report (SAR) FMLA General Notice Certain small welfare benefit plans may file a simplified annual reporting form in lieu of a Form In order to be eligible for the simplified filing, plans must be considered small (i.e., generally have fewer than 100 participants at the beginning of the plan year), meet the conditions for being exempt from providing an accountant s report, have 100 percent of assets invested in certain secure investments, hold no employer securities, and not multi-employer plans. Applies to health plans with 100 or more participants. There is an exclusion for plans which are unfunded, insured or a combination of the two that meet the requirements of DOL Reg Summarizes the Form 5500 financial information in a narrative form. The model language from DOL Reg b-10(d) has been provided in the Model Notices section of this document under Model Notice D. Every employer covered by the FMLA is required to provide a notice explaining the FMLA and providing information about the procedures for filing complaints of violations of the FMLA with the Wage and Hour Division of the DOL. Electronic posting is sufficient to meet this posting requirement as long as it otherwise meets the requirements. If an employer s workforce is comprised of a significant portion of workers who are not literate in English, the employer must provide the general notice in a language in which the are literate. Model Notice E Electronically submitted along with the Form 5500 to EBSA by the last day of the seventh month following the end of the plan year or by the extension due date, if Form 5558 is filed. Submitted electronically along with the Form 5500 to EBSA by the last day of the seventh month following the end of the plan year, or by the extension due date if Form 5558 is filed. Must be distributed to participants and beneficiaries within nine months after the end of the plan year. If extension is filed, must be distributed within two months after the end of the period for which the extension was granted. Employers must keep the notice posted on its premises at all times. Employers with FMLAeligible must include the notice in employee handbooks or other written guidance on employee benefits or leave rights or must distribute a copy of the general notice to each new employee upon hiring. 72 Federal Register 64731, and Instructions to Form 5500-SF ERISA 103(a)(3)(A), DOL Reg and DOL Reg ERISA 104(b)(3) DOL Reg b-10 DOL Reg (a) Both administrative and criminal penalties apply. Administrative penalties range from $25 per day to $1,100 per day. Willful violations can carry penalties up to 10 years in prison and a $100,000 fine. Both administrative and criminal penalties apply. Administrative penalties range from $25 per day to $1,100 per day. Willful violations can carry penalties up to 10 years in prison and a $100,000 fine. No specific civil penalties, but willful ERISA violations can carry criminal penalties up to 10 years in prison and $100,000 fine. An employer may be liable for compensation and benefits lost by reason of the violation, for other actual monetary losses sustained as a direct result of the violation, and for appropriate equitable relief, including employment, reinstatement, promotion or any other relief. Small (less than 100 ) unfunded, insured and combination plans are exempt. Small (less than 100 participants) unfunded, insured and combination welfare plans are exempt. Small (less than 100 participants) unfunded, insured and combination welfare plans are exempt. 50 or more

14 Page 14 of 33 FMLA continued Eligibility Notice The employer must notify the employee of the employee s eligibility to take FMLA leave. If the employee is not eligible for FMLA leave, the notice must state at least one reason why the employee is not eligible (e.g., the number of months the employee has been employed by the employer, the number of hours of service worked for the employer during the 12-month period, and whether the employee is employed at a worksite where 50 or more are employed by the employer within 75 miles of that worksite). Notification of eligibility may be oral or in writing. Model Notice F The notice must be provided within five business days (absent extenuating circumstances) of when an employee requests FMLA leave, or when the employer acquires knowledge that an employee s leave may be for an FMLA-qualifying reason. DOL Reg (b) An employer may be liable for compensation and benefits lost by reason of the violation, for other actual monetary losses sustained as a direct result of the violation, and for appropriate equitable relief, including employment, reinstatement, promotion or any other relief. 50 or more Rights and Responsibilities Notice Employers must provide written notice detailing the specific expectations and obligations of the employee related to FMLA leave and consequences of failure to meet these obligations, including: The leave may be counted against the employee s annual FMLA leave entitlement; Any requirement to furnish certification of a serious health condition, etc., and the consequences of failing to do so; Employee s right to substitute paid leave, whether employer will require such, and the conditions related to substitution; Requirement to make premium payments to maintain benefits, how to make such payments and the consequences of failure to make timely payments; Employee s status as a key employee and that restoration may be denied following FMLA leave and conditions for such denial; Employee s rights to maintain benefits during FMLA leave and restoration to the same or an equivalent job upon return; and Employee s potential liability for payment of premiums paid by the employer during FMLA leave if the employee fails to return to work. Model Notice F This notice shall be provided to the employee each time the Eligibility Notice is provided. If leave has already begun, the notice should be mailed to the employee s address of record. Additional requirements if the information provided by this notice changes. DOL Reg (c) An employer may be liable for compensation and benefits lost by reason of the violation, for other actual monetary losses sustained as a direct result of the violation, and for appropriate equitable relief, including employment, reinstatement, promotion or any other relief. 50 or more Designation Notice The employer must notify the employee whether the employee s leave will be designated and will be counted as FMLA leave. If the employer will require the employee to present a fitness-for-duty certification to be restored to employment, the employer must provide notice of such requirement with the designation notice. Model Notice G Within 5 days of when the employer has enough information to determine whether the leave is being taken for an FMLA-qualifying reason (e.g., after receiving a certification). DOL Reg (d) An employer may be liable for compensation and benefits lost by reason of the violation, for other actual monetary losses sustained as a direct result of the violation and for appropriate equitable relief, including employment, reinstatement, promotion or any other relief. 50 or more

15 Page 15 of 33 FMLA continued Notice of Opportunity to Change Health Plans Notice of Nonpayment If an employer provides a new health plan, has open enrollment or changes health benefits or plans while an employee is on FMLA leave, then the employee is entitled to the new or changed plans/benefits to the same extent as if the employee were not on leave. In the absence of an established employer policy providing a longergrace period, an employer s obligation to maintain the health insurance coverage of an employee on FMLA leave also ceases if the employee s payment of his or her share of the premium is more than 30 days late. In order to drop coverage, the employer must provide written notice to the employee that payment hasn t been received. Health Care Reform Effective March 23, 2010 Grandfathered Health Plans To maintain grandfather status, a plan must provide (a) a statement that the plan or coverage is believed to be a grandfathered plan, and (b) contact information for questions or complaints. This disclosure requirement would apply to any SPD, SMM or benefit enrollment materials provided to participants or beneficiaries. To maintain status as a grandfathered health plan, the plan or coverage must document the terms in existence on March 23, 2010 (e.g., plan documents, policies, certificate or contracts of insurance, SPDs, etc.), and retain documentation as long as the plan maintains grandfathered status. Model Notice H Notice of an opportunity to change health plans or benefits must be given to an employee on FMLA leave when given to active. The notice must be mailed to the employee at least 15 days before coverage is to cease and must advise the employee that coverage will be dropped on a specified date at least 15 days after the date of the letter, unless the payment has been received by that specified date. Provide notice in any plan materials describing benefits beginning with the first plan year on or after Sept. 23, Make records available for examination upon request. DOL Reg (c) DOL Reg (a)(1) Treas. Reg T DOL Reg HHS Reg An employer may be liable for compensation and benefits lost by reason of the violation, for other actual monetary losses sustained as a direct result of the violation and for appropriate equitable relief, including employment, reinstatement, promotion or any other relief. An employer may be liable for compensation and benefits lost by reason of the violation, for other actual monetary losses sustained as a direct result of the violation and for appropriate equitable relief, including employment, reinstatement, promotion or any other relief. Loss of grandfathered status will result in additional responsibilities under health care reform. 50 or more 50 or more

16 Page 16 of 33 Health Care Reform continued Effective March 23, 2010 Nursing Mothers PPACA amends the Fair Labor Standards Act to require to provide nonexempt nursing mothers unpaid breaks to express breast milk in a private place other than a restroom for up to one year after the child s birth. The breaks must be given as frequently as necessary. Employers with fewer than 50, which can demonstrate that compliance would cause them undue hardship, are not subject to the law s requirements. Whether compliance would be an undue hardship is determined by looking at the difficulty or expense of compliance for a specific employer in comparison to the size, financial resources, nature and structure of the employer s business. All who work for the covered employer, regardless of work site, are counted when determining whether this exemption may apply. Employers are not required under the FLSA to compensate nursing mothers for breaks taken for the purpose of expressing milk. However, where already provide compensated breaks, an employee who uses that break time to express milk must be compensated in the same way that other are compensated for break time. Several states already have similar law, so stricter state laws are not preempted. There are no notice requirements with this provision. Effective March 23, PPACA 4207 Amended FLSA 7 The DOL s Wage and Hour Division is charged with enforcement, but there are no specified penalties. The DOL may seek injunctive relief in federal district court and may obtain lost wages and reinstatement for an employee, if terminated for taking breaks to express milk.. Employers with less than 50 exempt if prove undue hardship. Effective Annual Dollar Limits Group health plans are prohibited from placing certain annual dollar limits on the value of essential health benefits. The limits are graduated with the minimum annual dollar limit for plan years beginning on or after Sept. 23, 2010, but before Sept. 23, 2011, at $750,000; for plan years on or after Sept. 23, 2011, but before Sept. 23, 2012, at $1.25 million; and for plan years beginning on or after Sept. 23, 2012, but before Jan. 1, 2014, at $2 million. Annual dollar limits on essential health benefits are completely prohibited after Jan. 1, Effective dates are outlined to the left. No notice required. Specific information should be included in plan documents. PPACA 1001 PHSA 2711 If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928, and a civil penalty of $100 per day will be assessed.

17 Page 17 of 33 Health Care Reform continued Effective Annual Notice of Waiver from the Annual Dollar Limit Requirement Under PPACA, annual dollar limits on essential health benefits are first restricted, and later prohibited. There was a temporary waiver program available for plans that sought a waiver from this requirement, such as mini-med plans and HRAs. Plans which were granted a waiver are required to provide a notice explaining to participants that the plan does not meet the annual dollar limit requirement, as a condition of receiving the waiver. On Aug. 19, 2011, an additional notice was issued to be used only for HRAs. Therefore, there are two model notices available. Model Notice I is for use with all plans except HRAs, and Model Notice J is for use with HRAs only. The annual waiver applies to plan years between Sept. 23, 2010, and Jan. 1, Effective Sept. 23, 2011, new annual waivers are no longer available, as waiver extensions were due no later than Sept. 22, Waivers that have been granted through Sept. 22, 2011, will be required to submit both a Waiver Extension and an Annual Limit Update in order to retain eligibility for the annual limit waiver through 2014.The first Annual Limit Update must be submitted by Dec. 31, 2012, and the second update by Dec. 31, Treas. Reg T(d)(3) DOL Reg (d)(3) HHS Reg (d)(3) OCIIO Sub-Regulatory Guidance (OCIIO , OCIIO A, OCIIO B, OCIIO C) CCIIO Supplemental Guidance (CCIIO D) If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928, and a civil penalty of $100 per day will be assessed. Dependent Coverage If a group health plan or insurer provides dependent coverage of children, the plan must make such coverage available until a child turns 26, regardless of student status, marital status, residency, etc. Special transition rule for grandfathered plans that eliminates required coverage if child has other employer-sponsored coverage. Transition rule ends Effective for plan years beginning on or after Sept. 23, Dependents up to age 26 should have been provided a 30-day special enrollment opportunity in the first plan year beginning on or after Sept. 23, This was a one-time enrollment opportunity. PPACA 1563 PHSA 2714 Code 9815 ERISA 715 If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928, and a civil penalty of $100 per day will be assessed.

18 Page 18 of 33 Health Care Reform continued Effective Internal and External Appeal Procedures Group health plans must comply with enhanced internal claims and appeals requirements and external review procedures. For example, an initial urgent care benefit determination must be made as soon as possible, but not later than 72 hours after the request. There are three model notices that have been made available in connection with this requirement, as well as a list of states with Consumer Assistance Programs that is available in Appendix II. Adverse benefit determination notices must be provided in a culturally and linguistically appropriate manner. The most recent guidance interprets this to require both small group and large group plans to provide the notice in a linguistically appropriate manner if at least 10 percent of people living in the county speak the same non-english language. The thresholds for the non-english language are based on the American Community Survey data published by the U.S. Census Bureau. A 2011 list of all 255 affected counties is available in Appendix I. Grandfathered plans are exempt from this requirement. Model Notices K, L, M Appendix I and II The new internal and external appeal procedures are being implemented in three stages, with various implementation dates. The 72-hour initial Adverse Benefit Determination notice and the culturally and linguistically appropriate notice are delayed until plan years beginning on or after Jan. 1, After that date, the non-english version of the culturally and linguistically appropriate notice requirement must be provided to participants upon request. PHSA 2719 DOL Reg (e) If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928, and a civil penalty of $100 per day will be assessed. Lifetime Dollar Limits Lifetime dollar limits on essential benefits are prohibited under PPACA effective for plan years beginning with Sept. 23, 2010, and thereafter. Individuals who have exhausted a lifetime limit under a group health plan and who are otherwise eligible must be given a written notice that the lifetime limit no longer applies. If individuals who exhausted a lifetime dollar limit are no longer enrolled, they must be provided a written notice informing them of an opportunity to enroll. Eligible individuals must be given a written notice that the lifetime limit no longer applies. Individuals no longer enrolled due to exhaustion of the lifetime limit should have been provided a 30- day special enrollment opportunity in the first plan year beginning on or after Sept. 23, This was a one-time enrollment opportunity. PPACA 1001 PHSA 2711 Treas. Reg T DOL Reg HHS Reg If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928, and a civil penalty of $100 per day will be assessed. OTC Medicines or Drugs PPACA prohibits distributions from HSAs and Archer MSAs and reimbursements from health FSAs and HRAs to cover expenses for over-the-counter medicines or drugs without a prescription (except insulin). The restrictions do not apply to non-medicine items available over the counter (e.g., equipment, supplies, and medical devices). Applies to expenses incurred after Dec. 31, Code 106(f) Code 220(d)(2) and 223(d)(2) Failure to abide by requirements may result in severe tax consequences for plan and individuals receiving reimbursements.

19 Page 19 of 33 Health Care Reform continued Effective Patient Protections If a group health plan provides benefits for emergency services, the plan may not require preauthorization; must provide coverage regardless of whether the provider is in- or out-of-network; may not impose any administrative requirement or coverage limitation that is more restrictive than would be imposed on in-network emergency services; and must comply with certain cost-sharing requirements. The plan may apply cost-sharing requirements other than copayments and coinsurance to emergency services provided out-of-network if the cost-sharing generally applies to out-of-network benefits. A group health plan may not require preauthorization or referral by the plan or a primary care physician to obtain services from an OB/GYN. Group health plans that require designation of a primary care provider must provide a notice to each plan participant describing the plan s requirements regarding designation of a primary care provider and certain other rights of the participant or beneficiary. Grandfathered plans are exempt. Model Notice N Effective for plan years beginning on or after Sept. 23, The notice is required to be provided whenever an SPD or other description of plan benefits is provided to a participant or beneficiary. PHSA 2719A Treas. Reg AT DOL Reg A HHS Reg If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928, and a civil penalty of $100 per day will be assessed. Preventive Care Mandate Group health plans must provide certain preventive services without imposing any cost-sharing, including copays, coinsurance or deductibles. Coverage must be provided for: Evidence-based items or services with an A or B rating recommended by the U.S. Preventive Services Task Force (USPSTF) Immunizations for routine use in children, adolescents or adults recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention Evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration (HRSA) for infants, children and adolescents Other evidence-informed preventive care and screenings for women provided for in comprehensive guidelines supported by HRSA The current list of required preventive services is available at It will be updated on an ongoing basis as the various agencies submit recommendations and those recommendations are approved. Grandfathered plans are exempt from this requirement. Preventive services at no cost sharing were effective for plan years beginning on or after Sept. 23, However, recommendations from the various agencies may have staggered effective dates. The recommendations from the USPSTF are considered issued on the last day of the month on which the task force publishes it. The recommendations by HRSA for women s preventive services are effective for plan years beginning on or after Aug. 1, Certain nonprofit religious are exempt only from the requirement to provide FDA-approved contraceptive coverage. There is also a delay for other nonprofit religious who serve or employ individuals outside the organization s religious tenets and who do not currently offer contraceptive coverage until plan years beginning on or after Aug. 1, PPACA 1001 PHSA 2713 ERISA 715 Code 9815 If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928, and a civil penalty of $100 per day will be assessed.

20 Page 20 of 33 Health Care Reform continued Effective Prohibition on Pre-existing Condition Exclusion Group health plans may not include any pre-existing condition exclusions with respect to individuals enrolled in the plan who are under 19 years of age. This exclusion applies to all ages for plan years beginning in ERISA plan documents must be amended to reflect a plan design change. There is no model notice provided; however, ERISA requires either the SPD be revised to reflect plan changes or plans must append an SMM to the existing SPD. Effective for plan years beginning on or after Sept. 23, 2010, for individuals under 19 years of age and plan years beginning on or after Jan. 1, 2014, for all ages. PHSA 2704(a) Code 9815 ERISA 715 Treas. Reg DOL Reg HHS Reg If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928, and a civil penalty of $100 per day will be assessed. Rescission of Coverage Group health plans and insurers are prohibited from rescinding coverage for individuals who are covered under the plan, except in cases of fraud or intentional misrepresentation. Rescission is defined as a cancellation or discontinuance of coverage that has retroactive effect. Effective for plan years beginning on or after Sept. 23, Thirty days advance written notice before coverage may be rescinded. PPACA 1251 PHSA 2712 Treas. Reg T DOL Reg HHS Reg If violation is not corrected within 30 days of discovery, then employer must self-report violation on IRS Form 8928, and a civil penalty of $100 per day will be assessed. Effective Comparative Clinical Effectiveness Research Tax Health care reform requires fees to be paid to the IRS by health insurers and sponsors of self-insured health plans to fund research into the clinical effectiveness of medical treatments, procedures, drugs and other strategies. The fees will fund a new nonprofit corporation called the Patient-Centered Outcomes Research Institute. Future guidance is expected prior to the effective date of this provision. Fees of $1 times the average number of covered lives are payable for policy and plan years ending between Oct. 1, 2012, and Sept. 30, Fees of $2 times the average number of covered lives are payable for policy and plan years ending between Oct. 1, 2013, and Sept. 30, No fee is applicable for plan years ending on Oct. 1, 2019, or later. PPACA, Pub. L. No , 6301, IRS Notice The fees are expected to be assessed, collected and enforced in the same manner as taxes under other Code provisions.

21 Page 21 of 33 Health Care Reform continued Effective Exchange Notice Requirement Employers must provide information relating to exchange and consequences if employee purchases a qualified health plan through exchange in lieu of employer-sponsored coverage. There is not a model notice available, and regulations implementing the notice requirement may be issued at a future date. Disclosure requirement is generally effective for beginning on March 1, Employees hired on or after the effective date must be provided the notice at the time of hiring, while current must be provided the notice no later than the effective date of March 1, USC 218B, as added by PPACA, Pub. L. No No known penalty at this time. subject to the Fair Labor Standards Act must distribute the notice. Notice of Material Plan Modification Any material modification of plan terms or coverage that is not reflected in the most recently provided four-page Summary of Benefits and Coverage (SBC) must be issued in an SMM or updated SBC (discussed next). Must be provided at least 60 days before the modification is implemented. Effective Sept. 23, 2012 PHSA 2715(d)(4) 77 Federal Register 8667 (Feb. 14, 2012) A penalty of up to $1,000 per failure. The fine cannot be paid from plan or trust assets. Summary of Benefits and Coverage (SBC) Group health plans are required to provide a four-page, double-sided SBC in no less than 12 pt. font that accurately describes the benefits and coverage under the applicable plan or coverage to all applicants, policy holders and enrollees. The summary may be provided in paper or electronic form and must include certain required content. Model Notice O The final regulations delayed the effective date until Sept. 23, Therefore, the requirements are applicable beginning on the first day of the open enrollment period beginning on or after Sept. 23, For participants and beneficiaries who enroll in group health plan coverage outside of open enrollment (i.e., new hires and special enrollees), the SBC must be provided on the first day of the first plan year that begins on or after Sept. 23, Federal Register 8667 (Feb. 14, 2012) A penalty of up to $1,000 per failure. The fine cannot be paid from plan or trust assets.