The Caesars Palace, Las Vegas November 2 nd 6 th, 2013 www.employerhealthcarecongress.com The use, disclosure, reproduction, modification, transfer, or transmittal of this presentation with out the written permission of the Employer Healthcare & Benefits Congress is strictly prohibited. 2012 Employer Healthcare & Benefits Congress
THE ERISA EFFECT ON VOLUNTARY BENEFITS Joel E. Horowitz McCarter & English, LLP October 26, 2012 www.mccarter.com
Topics What is ERISA? What Benefits Are Subject to ERISA? What Employers Are Subject to ERISA? Exemptions from ERISA coverage ERISA Requirements in General SPD and Disclosure Requirements Annual Reporting Form 5500 and Other How to Approach ERISA Coverage
ERISA Defined Employee Retirement Income Security Act (ERISA) Federal Law Enacted in 1974 Title l applies to health and welfare benefits and retirement plans 7 parts 5 parts apply to health and welfare benefits Part 1 Reporting and Disclosure Part 4- Fiduciary responsibility Part 5 Administration and Enforcement Part 6 COBRA and additional standards for group health plans Part 7 HIPPA, FMLA, Newborn and Mother Health Protection, Mental Health Parity Act, Women s Health and Cancer Rights Act (WHCRA)
What Does ERISA Do? ERISA regulates group-sponsored benefits Requires detailed disclosure to covered individuals Requires detailed reporting to the government Imposes strict fiduciary code of conduct on employers that sponsor ERISA Plans and those who administer them Imposes federal mechanism for enforcing rights and duties with respect to ERISA plans and preempts a large body of state laws
Enforcing ERISA DOL (Department of Labor) - Enforces ERISA Title l mainly through the Employee Benefits Security Administration - Failure to comply with ERISA requirements can be quite costly Through DOL enforcement actions Penalty assessments Employee lawsuits
Definition of Welfare Benefit Plan A Welfare Benefit Plan is: A plan, fund or program Established or maintained by an employer Established to provide welfare benefits to participants and beneficiaries
Benefits Subject to ERISA Health, dental and/or vision insurance Health flexible spending accounts Health reimbursement arrangements Accidental death and dismemberment insurance Group term life insurance Short-term and long term disability Severance insurance pay Wellness and employee assistance programs Voluntary benefits offered as pre-tax benefits under any 125 plan Other?
Employers Subject To ERISA Private-Sector Employers - Corporations - Partnerships - Sole Proprietorships - Tax-exempt Organizations Unless Exempt under 501(a) and directly tied to a Government Entity
Employers Exempt from ERISA Employer Exemptions Government Churches and certain related organizations Programs maintained solely to comply with state-law requirements for: Workers compensation Unemployment compensation Disability insurance Plans maintained outside the US for non-aliens Regulatory Exemptions - payroll practice - Voluntary employee pay-all
Safe Harbor Exemptions from ERISA Voluntary Plan Exemption Voluntary employee-pay-all Employees pay full cost of coverage Employer may not make any contribution toward coverage Insurer may not pay employer for being allowed into workplace Employer may not endorse program Involvement by employer beyond payroll deductions may take arrangement outside exemption Court Cases» Assisting employees with claim forms» Negotiating with insurers» Record keeping» Pre-tax deductions under 125 Plan
Safe Harbor Exemptions from ERISA Certain Payroll Practices Wages, overtime pay, shift premiums Holiday or weekend premiums Sick pay or income replacement benefits Vacation Jury duty
ERISA Requirements Plan document for each plan What is a separate plan? Compliance with terms of plan Compliance with fiduciary standards Fidelity bond must be purchased to cover every person who handles plan funds Summary Plan Description (SPD) must be furnished automatically to plan participants Summary of Material Modification (SMM) must be furnished automatically to plan participants when a plan is amended
ERISA Requirements Copies of certain plan documents must be furnished to Participants and beneficiaries on written request and be made available for inspection Form 5500 must be filed annually for each plan (subject to important exceptions, especially for small plans) Summary Annual Report (summarizing Form 5500 information) must be furnished automatically to plan Participants for a plan that files a Form 5500 (except totally unfunded welfare Plans)
Plan Document ERISA Requirements ERISA benefits must be provided under a plan document ERISA does not dictate contents ERISA Plan can exist without document Will be out of compliance with written document requirement Document Type No particular format Influenced by nature of plan benefits
Basic ERISA Rules Insured benefits may use a wrap document Insurers may not have all provisions required of a plan document Supplement contracts using wrap document Contains missing terms and wraps itself around insurance contract Identifies the plan administrator Identifies the fiduciary Plan Year and Plan Number Plan name
ERISA Requirements Bundling benefits in one or more ERISA plans Employers may choose to establish a single bundled Plan with all welfare benefits, including non-erisa fringes such as cafeteria plan and dependent care assistance plan Bundling ERISA and non-erisa benefits together does not make non- ERISA benefits subject to ERISA Bundling through wrap documents Standard way through use of wrap or umbrella document Wraps around set of documents to combine into one legal document
Summary Plan Description (SPD) Who must be provided an SPD? Must be furnished to participants covered under ERISA Not required to furnish to welfare plan beneficiaries in most cases No small Plan exception Must be furnished to COBRA qualified beneficiaries, parent or guardian under a QMSCO, and to spouse or dependent or deceased retiree who remains entitled to benefits
Summary Plan Description (SPD) When and how to furnish SPDs Should generally be furnished with 90 days after participant first becomes covered New plans within 120 days after plan becomes subject to ERISA Updated SPDs must be furnished to all covered participants every 5 years (every 10 years for a plan that had no changes) Must be furnished in a way reasonably calculated to ensure actual receipt of the material, using method likely to result in full distribution
Summary Plan Description (SPD) Updating the SPD (Summary of Plan Description) Any modification in the terms of the plan that is material and any change in information required in the SPD must be reported to Plan Participants ERISA allows plan administrators to report such changes through a Summary of Material Modification (SMM) SMM provided in same manner to same individuals as SPD Must be furnished within 210 days after the end of the plan year in which the modification changed However, an SMM relating to a material reduction in covered services or benefits under a group health Plan must be furnished no later than 60 days after the date of the adoption of the reduction
Disclosure under PPACA PPACA adds a new twist to the ERISA SPD requirements by requiring insurers of insured health plans and plan administrators of self-insured health plans to provide applicants and enrollees a summary of benefits and coverage before enrollment or re-enrollment Must be no longer than four pages and meet specific requirements for appearance Format requirements Language understandable by the average plan enrollee Uniform definitions, co-payments and other cost-sharing provisions, etc.
Disclosure Under PPACA Summaries must be provided within 24 months (2012 plan years) of the enactment date of PPACA Penalties $1,000 may apply for each willful failure to provide a summary Notice of any material modification (SMM) to the plan or coverage not reflected in the most recently provided summary must be furnished no later than 60 days before the date the modification becomes effective
PPACA Notices The Patient Protection and Affordable Care Act (PPACA) requires Annual Notices to eligible employees based upon Status of any new or renewed Group Health Plan on or after September 23, 2010. These notices must be provided to all eligible employees on or prior to the first day of the Group Health Plan effective date.
Other Disclosures To Participants And Beneficiaries Providing Copies of Documents on Written Request Upon written request by a participant or beneficiary, the ERISA Plan administrator must furnish: Copy of latest SPD and SMM Latest annual report Any terminated report Bargaining agreement Trust agreement Any other instrument under which the plan is established or operated
Other Disclosures To Participants And Beneficiaries Providing Copies of Documents on Written Request Upon written request by a participant or beneficiary, the ERISA Plan administrator must furnish: Documents within 30 days of request Penalties of $110.00 per day may be assessed for each day after the deadline that a plan administrator does not respond May charge reasonable amount for furnishing documents
Annual Form 5500 Reporting Filing Form 5500 with DOL Unless exempted, plan administrator of an ERISA Plan must report specified information each Plan Year using Form 5500 Reporting obligation applies to each ERISA Plan an employer sponsors Penalties for 5500 Form Failure Plan administrator subject to penalties up to $1,100.00 for every day form 5500 is missing or incomplete and can be subject to possible criminal penalties for willful failure to file Penalties are cumulative Assessed separately for each missing or incomplete Form No statute of limitations DOL offers program for voluntary correction of From 5500 filings
Form 5500 Exemptions Small unfunded or insured plans completely exempt To be considered a small plan, it must have fewer than 100 covered participants at the beginning of the Plan Year Only participants actually covered under plan are counted Includes COBRA qualified beneficiaries and retirees covered in the plan, but does not include covered spouses and dependents
Role of Broker/Agent Who is responsible for ERISA compliance? Environment of increased emphasis on compliance and self-reporting Client expectations
Voluntary Benefits and ERISA Is the arrangement exempt? How to address employer concerns Is there value in having a voluntary benefits plan subject to ERISA? Permits employer involvement Tacit or explicit employer endorsement Integrates voluntary benefits into employer s overall benefits program
Voluntary Benefits and ERISA How to address reporting and disclosure Insurers already assist with ERISA compliance with SPDs, plan documents, administration and 5500 information Employers already comply with reporting and disclosure obligations
Voluntary Benefits and ERISA Is the ERISA issue always raised now? Who raises it? How do employers react to the ERISA issue? How can brokers and insurers satisfy employers with respect to ERISA coverage and obligations?