Note: This checklist is a brief listing of some of the compliance requirements that apply to health and welfare benefits under federal law. It is not intended to describe all compliance requirements or to provide full details of any of the rules mentioned or any exceptions to those rules. This list is provided to help you identify compliance requirements for your plans, but note that SIG does not provide legal advice and you should always consult with qualified legal counsel for advice on compliance requirements that apply to your plans. EMPLOYER Compliance Checklist 1. Are Form 5500 annual reports being filed for all welfare benefits that have over 100 participants or that pay benefits from a trust? 2. Is one consolidated Form 5500 being completed or separate ones for each benefit with over 100 participants? If a consolidated Form 5500 is being submitted, does the wrap plan document include up-to-date HIPAA, COBRA, ACA and other language? Is an updated wrap plan SPD being distributed to all existing participants and covered spouses as well as new participants? (Note: for most Smith & Downey documents prepared before 2014, updating may be required) 3. Discuss control group rules- (Code sections 414 (b) and (c). Are there any subsidiaries or other companies that the employer is connected to? Legal counsel is recommended to confirm if two or more companies are part of a control group. 4. Does the Plan comply in operation with the 2007 proposed Section 125 regulations? Although the regulations are still in proposed form they can be relied upon and are the only guidance available: a. Amendments must be signed before they are effective b. Additional non-discrimination testing procedures c. Dependent Care FSA plan may allow terminated employees to spend down their DC FSA balance during the remainder of the plan year d. FSA elections may evergreen each year e. Payroll deductions that span 2 plan years for dental and vision are permitted if the dental and/or vision benefits require a 2-year commitment f. Opt out benefits must be included in the cafeteria plan g. Pre-tax opportunities to purchase additional paid time off must be included in the cafeteria plan (and meet certain usage requirements) h. Plus other considerations 5. Is a Summary Annual Report (SAR) being given to employees in 100+ groups or plans with trusts? 6. If any plan over 100 participants has a trust, is the trust being audited annually? 7. Does the employer have different waiting periods for benefits to begin or different employee deduction levels for benefits for different levels of employees? It should be tested for discrimination purposes.
8. If all employees in the controlled group are not treated exactly the same, is yearly nondiscrimination testing being done on the Section 125 plan, any self-funded medical plan, the medical FSA s and the group term life plan? (Note that, even if all employees in the controlled group are treated exactly the same, "usage testing" is required for any Dependent Care FSA and for the "key employee concentration test" portion of the 125 tests.) 9. For the owners of an S-Corporation (2% or greater only), LLC, LLP or Sole Proprietor, be sure they are not included in the pre-tax Section 125 plan and do not participate in flexible spending accounts. 10. If there are multiple companies/subsidiaries covered under a single health plan, be sure they are a controlled group to avoid creating a MEWA (Multiple Employer Welfare Arrangement). 11. If the plan has employee contributions, does employer have a fidelity bond in place? (You need a fidelity bond for all retirement plans AND health and welfare plans with employee contributions.) If there is not a Trust and all employee deductions are taken on a pre-tax basis then a fidelity bond is not needed. NOTE: are STD and LTD deductions taken post-tax? 12. Does the employer have retirees or other people not on the payroll covered under the benefits plan? 13. Does the employer permit employees on non FMLA leaves of absence (disability or otherwise) to remain on the benefits plan? 14. Does the employer have any type of special eligibility practices or rules in place that may require approval by an insurance carrier (or a stop loss carrier for self-funded coverage)? 15. Does the employer have liability insurance in place for Human Resource errors for ERISA fiduciary liability? 16. Does the employer maintain written procedures for reviewing possible Qualified Medical Child Support Orders? 17. Does the employer have any office locations or employees in San Francisco or Massachusetts that require health insurance coverage in various forms? Some of the requirements of these laws have changed because of the federal Affordable Care Act. Has the employer reviewed the current requirements of the San Francisco or Massachusetts law to identify any compliance issues? 18. Medical plans and wellness programs should be reviewed to ensure they comply with the Americans with Disabilities Act. Any wellness programs (including health risks assessments) that impose a penalty for failing to participate should be reviewed to make sure they do not violate ADA restrictions on asking disability-related questions or requiring medical exams 19. Employers should be aware that certain violations of COBRA, the Affordable Care Act, HIPAA and other laws that apply to group health plans must be reported on IRS Form 8928, with excise taxes paid if required.
20. USERRA notices must be posted in workplace (or provided to employees going on qualifying military leave. 21. Employers who are subject to FMLA must provide health benefits and permit changes to cafeteria plan elections and administer other benefits in accordance with FMLA and policies established by the employer and communicated to employees. 22. For employers that are subject to ERISA, if the employer offers voluntary benefits to employees that: 1) have employer contributions; 2) are endorsed by the employer; or 3) are programs under which the employer receives some compensation (not including reasonable expenses), then the benefits will be subject to ERISA. All voluntary benefits that are being treated as non-erisa plans must be reviewed for possible need to comply with ERISA, HIPAA, COBRA and health reform requirements. (Note that any actions by the employer beyond allowing the insurer to market the program to employees and to collect premiums from employees may be viewed as an endorsement by the employer.) ELIGIBILITY 23. New status change events permit employees to (1) drop coverage to enroll in other exchange coverage during open enrollment or special enrollment and (2) to drop coverage and enroll in other coverage following a reduction in hours below 30 hours per week. These are optional but plan documents and SPDs must be amended if the employer wishes to adopt one or both of these. 24. If the medical, dental or vision plans allow for coverage for a domestic partner coverage or a child of a domestic partner: a. be sure the employee payroll deduction is post-tax for the applicable portion of the premium (unless the domestic partner or child is a Code Section 105 dependent) and any portion of the cost of that coverage that is paid for by the employer must be treated as imputed income on the employee s W-2 for the year. Alternatively, the full value of coverage provided for a domestic partner may be included on the employee s W-2 for the year. b. COBRA does not apply to coverage for a domestic partner, but anyone covered as a child of a domestic partner generally would be considered a child for purposes of COBRA and would be entitled to COBRA benefits following a qualifying event. Also, if the Plan provides COBRA-like coverage for domestic partners, confirm that appropriate language is in plan documents, SPDs and insurance/stop loss contracts. 25. If the employer has an on-site clinic, wellness program or an employee assistance program that is not part of the employer s medical plan (i.e., if benefits are offered to employees not covered by the medical plan), it is important to determine whether the benefits create a group health plan that must comply with ERISA, COBRA and other laws that apply to group health plan. 26. Dependent eligibility requirements should be accurately and consistently reflected in plan documents and SPDs and enforced in practice (periodic dependent audits may be helpful).
FLEXIBLE SPENDING ACCOUNTS 27. HEART Act of 2008 consideration for qualified reservists called to military duty to withdraw FSA funds early. 28. Health FSAs may permit carryovers of up to $500 in unused balance to the next plan year. This is optional, but plan documents must be amended if employer wishes to adopt it. 29. Health Care FSA must limit employee salary reduction contributions to no more than $2,500 per plan year (subject to adjustment for inflation for 2015 plan years, the limit is $2,550). The Plan limit can adjust automatically with those increases if desired and if provided in the Plan document and SPD. COBRA 30. Is the Initial COBRA notice being mailed to employees and spouses when they first join the COBRA eligible plans? Are they being mailed to the employee/spouse s house and HR keeping a copy of meter mailed envelope in the file for proof? If it isn t being done, do one big mailing and then maintenance from that point forward. (If not already updated, COBRA Initial and Qualifying Event notices should be updated to include language about marketplace coverage, preferably based on model notices provided by Department of Labor in May 2014.) 31. Does the employer maintain COBRA qualifying event election notices and election forms, unavailability of COBRA notices and COBRA termination notices, and provide them when required and keep detailed records of compliance? HIPAA 32. Does the employer maintain written HIPAA privacy policies and procedures for complying with HIPAA privacy regulations? Has the Policy been updated to include the HIPAA HITECH language and other changes required by final regulations issued in 2013? (Policies and procedures are not required for certain insured plans, if the employer has minimal contact with PHI. Of course, health FSAs are not insured so the partial HIPAA privacy exemption for some insured plans does not apply to an employer s health FSA.) 33. For any self-funded health plan (including a health FSA), has the employer provided an up-todate HIPAA privacy notice to all employees (and COBRA beneficiaries)? Notice must be given to each new participant and again once every 3 years. Notices need only go to covered employees (and, if applicable covered retirees and COBRA beneficiaries who have not already received a copy) and the every 3 year rule notice can be a simple reminder notice unless the HIPAA policy has changes. Notices should have been updated for final regulations issued in January 2013. (Sponsors of insured health plans are not required to automatically distribute a privacy notice. However, if the insured plan has more than minimal contact with PHI, the sponsor is required to maintain a privacy notice and provide it on request.)
34. For employers that are required to distribute a privacy notice, if the employer has an employee benefits website, be sure to post the employer s current HIPAA Privacy Notice on it. 35. Does the employer have a Business Associate Agreement in place with all vendors that have access to private health information for a health plan? (All business associate agreements should have been updated for the final HIPAA regulations issued in January 2013). Updated Business Associate Agreements were required to be delivered no later than September 23, 2014. 36. Does the employer comply with the HIPAA security regulations, including maintaining an upto-date HIPAA security policies and procedures document (updated for the January 2013 regulations)? 37. Medical plans must comply with the HIPAA health status nondiscrimination regulations and any. Schedules of benefits and wellness program features should be reviewed to determine if they comply with these requirements. 38. Health-contingent wellness programs that provide financial incentives must meet the wellness program requirements under the HIPAA health status nondiscrimination regulations MEDICARE PART D 39. Medicare Part D Notice must be distributed annually to all employees and covered dependents that are Medicare eligible or who will become eligible within the next 12 months. In addition, all new employees/dependents must also receive a notice with enrollment materials. One notice mailed to Employee name and Family is sufficient. Notices may be provided annually to all employees if it is not practical to identify all Medicare-eligible individuals. 40. Medicare Part D Notice to the Centers for Medicare and Medicaid Services must be submitted on-line one time per year within 60 days after the plan year ends. Current notices and information are at "http://www.cms.hhs.gov/creditablecoverage/" GENERAL NOTICES 41. Does the employer send the Women s Cancer Rights Act letter to medical plan participants once per year? Notice should also be provided with enrollment materials. 42. A Notice of Special Enrollment Rights should be provided to employees when they first participate or decline to participate in the health plan and during each later open enrollment period. This Notice should include special CHIP\Medicaid language that became effective starting in 2009.
43. CHIPRA Notice must be distributed once per year, 1 st class mail to ALL employees who reside in one of the states listed on the notice (38 states as of November 2014). This applies whether the employee eligible for health coverage or not. The fine is $100 per day. The notices are updated about once a year. The current version is available here each year: http://www.dol.gov/ebsa/ Notices are not required to be provided to employees residing in any of the states not listed in the notice (e.g., notices are not currently required for residents of Maryland, Delaware, California or Washington, DC). ANCILLARY COVERAGE 44. If the employer paid life insurance benefit is over $50,000, is the employer addressing imputed income back to the employee on the W-2 for the coverage over $50,000? 45. If the employer has LTD benefits on a contributory or gross up basis for employees or executives is the premium value imputed on each pay check or on the year end W-2 so that the benefit will be tax-free? 46. STD & LTD plans that transfer from 100% employer paid to 100% employee paid must have employees sign an annual election form in order to bypass the IRS 3 year rule to allow for benefits to be tax-free to the employee. If the annual election form is not signed, then the benefits received will be pro-rated as taxable and tax-free under the 3-year look back rule. 47. Does the employer have employees that work (not reside) in any of the following states that require mandatory state short-term disability insurance: NY, NJ, CA, RI, HI and Puerto Rico? HEALTH CARE REFORM 48. Provide all new employees with marketplace coverage option notices within 14 days of start date 49. Summary of Benefits and Coverage (SBC). SBCs must be given to all eligible employees, and to anyone covered as a retiree or under COBRA. A separate SBC must be provided to any dependent known to be living at a different address during initial enrollment, open enrollment or special enrollment periods (as detailed below). If written application materials are provided, the SBC must be sent with those materials. If written application materials are not provided, the SBC must be distributed no later than the first day the participant is eligible to enroll. If there are any changes in the SBC between the initial distribution and the first day of coverage, a revised SBC must be provided. i. SBC for newly eligible participants an SBC must be provided for each benefit package for which a participant is newly eligible in any distribution of enrollment materials. If written enrollment materials are not distributed, furnish the SBC no later than the first day the individual is eligible to enroll. ii. SBC for HIPAA special enrollees an SBC must be distributed within 90 days from enrollment for any HIPAA special enrollee.
iii. SBC for future open enrollments During open enrollment, only an SBC for the benefit package option in which the participant is currently enrolled must be provided. If the participant must make an active election for coverage or can change coverage during open enrollment, the SBC must be provided with other open enrollment materials. If a participant does not have to enroll and has no opportunity to change coverage during open enrollment, the SBC must be provided no later than 30 days prior to the beginning of the Plan year. If the contract of insurance has not been issued or renewed before that 30-day period, the SBC must be provided as soon as practicable but no later than 7 business days after issuance of the new contract of insurance, or the receipt of written confirmation of intent to renew, whichever is earlier. iv. SBC on request an SBC must be provided as soon as practical (but no more than 7 business days) after a request. v. SBC penalties - Federal penalty is $1,000 per failure (a failure with respect to an employee or beneficiary is a separate failure) and potentially $100 per day per affected person (regulations not yet written on how the penalties will be coordinated). vi. Changes to the SBC: A 60-day advance notice is required if the employer makes any material mid-year change that impacts the information reflected on the SBC. Notice can be provided by either resending the SBC or providing a separate notice. A 30-day advance notice requirement applies to non mid-year changes. 50. W-2 - total cost of health coverage must be included on the W-2 (this should include both the employer and employee contribution specific to the tier of coverage the employee is enrolled during the tax year) Employers with fewer than 250 W-2 s are exempt for now. 51. For plan years ending on or after October 1, 2015 and before October 2016 pay the required federal fee of $2.17 times the average number of covered lives (for Patient-Centered Outcomes Research Trust Fund). 52. For self-funded plans, pay the transitional reinsurance fee if not part of exempted plan based on 2015 update. 53. Qualifying wellness program penalties/rewards may be as high as 30% of the total cost of coverage (and perhaps as high as 50% if permitted by the regulators). 54. For sponsors of non-grandfathered self-funded plans, confirm compliance with provider nondiscrimination rules.
55. For employers with 50 or more full-time equivalent employees, prepare for compliance with employer mandate (or prepare to pay applicable penalties). a. Rules apply starting in 2015 for employers with 100 or more FTEs and in 2016 for employers with at least 50 but fewer than 100 FTEs. b. To avoid no-coverage penalties, offer minimum essential coverage to at least 95% of full-time employees (at least 70% for 2015 plan years). c. To avoid (or minimize) play and pay penalties, coverage must satisfy minimum value and affordability tests. Penalties will apply for any full-time employee who is not offered compliant coverage who purchases coverage through an exchange and qualifies for a premium subsidy. d. Adopt lookback measurement period rules or monthly measurement period rules to avoid or minimize liability for penalties (unless coverage is always offered to everyone who works at least 30 hours in any week. Plan documents and SPDs must include appropriate language. 56. If and when regulations are issued and become effective, non-grandfathered insured plans must eliminate discrimination in favor of highly compensated employees. 57. For sponsors of self-funded plans and for all employers that are subject to employer mandate, annually report minimum essential coverage information to employees and IRS (starting in 2016 for 2015 plan years). 58. Medical plans must comply with the Mental Health Parity and Addiction Equity Act. Plan documents and schedules of benefits must be reviewed and revised if needed. February 5, 2016