A Minefield of

Acronyms – ERISA,

COBRA, HIPAA,

FMLA, oh my!

General Employee Benefit

Welfare Plan Compliance

Road Map

- What’s new after tax reform?

- What else is new/changing?

- What hasn’t changed?

Changes from Tax Reform

Tax Reform Changes

• Individual Mandate Repealed

– Does not take effect until 2019

• Individuals are still required to be insured throughout 2018

– Penalty does not technically go away, but the penalty amount is $0

Tax Reform Changes

• Employer Tax Credit for Paid Family and Medical Leave

– Temporary (for now) – 2018 and 2019 only

– Qualifying employee must:

• Have been employed for at least one year, and

• Makes less than $72,000 annually

– Must have written policy that:

• Provides at least 2 weeks of paid leave

• At a rate that is at least 50% of employee’s normal pay

• For leave permitted under FMLA (no vacation, PTO, etc.)

– Credit is calculated based upon wages

• Starts at 12.5%

• increases by .25 (up to a maximum of 25%) for each % of income over 50% the employer provides

Tax Reform Changes

• Transportation Benefits– Employers cannot deduct expenses associated with qualified

transportation fringe benefit programs; and

– Employees cannot exclude bicycle commuting expenses from gross income; and

– Moving expense reimbursements are not deductible for employers and cannot be excluded from employees’ gross income

What Else is Changing?

Other Changes• New Rules for Disability Claims

– Issued in 2016, then delayed, but effective April 1, 2018

• The final rule includes the following provisions for processing claims and appeals for disability benefits:– Improvements to basic disclosure requirements;

– Rights to claim files and internal protocols;

– Rights to review and respond to new information before final decisions;

– Conflict of interest rules;

– Deemed exhaustions of claims and appeal processes;

– Notices written in a culturally and linguistically appropriate manner; and

– Certain coverage rescissions are adverse benefit determinations subject to the claims procedure protections.

Other Changes• Change in HSA Family Contribution Limit

– $6900, then to $6850, then back to $6900?!?!

• State Individual Mandates

• Employment Issues– Overtime Rule - back to the drawing board

– New proposed tip-pooling regulations

– New standards for determining status of unpaid interns• “Primary Beneficiary” Test

Other Changes

• Employment Issues– New paid sick leave ordinance for employees in Austin

• Must be give to any employee working >80 hours per year inside the Austin City Limits.

• Employers with >15 employees must provide 8 days/year

• Employers with <15 employees must provide 6 days/year

• Leave accumulates immediately at 1 hour per 30 hours worked

• PTO plans should suffice, so long as not “vacation-only”

• Effective October 1, 2018 (Lawsuits have already been filed to prevent this)

Other Changes

• EEOC Wellness Rule Vacated– Big point of emphasis!

– Regulations now under ACA, HIPAA, GINA, ADA (DoL and EEOC)

– Two kinds of wellness programs:

• Participatory wellness programs

• Health-contingent wellness programs (outcomes-based)

– Regulations have increased the maximum reward under a health-contingent wellness program from 20% to 30% of the cost of coverage and further increased the maximum reward to 50% for wellness programs designed to prevent or reduce tobacco use –but other EEOC limits may apply if genetic information is asked/obtained.

Other Changes• Association Plans (rules finalized 6/19/18)

– Changes definition of “Employer” under ERISA• Can include self-employed individuals

– Can be by trade or region (but must have legitimate secondary business purpose)

– HIPAA may be a roadblock

What is NotChanging?

EBSAEBSA's oversight authority extends to nearly 681,000 retirement plans, approximately 2.3 million health plans, and a similar number of other welfare benefit plans, such as those providing life or disability insurance. These plans cover about 143 million workers and their dependents and include assets of over $ 8.7 trillion (as of October 2, 2015).

Enforcement Strategy

National Projects:

• Contributory Plans Criminal Project (CPCP)

• Rapid ERISA Action Team (REACT)

• Employee Stock Ownership Plans (ESOPs)

• Consultant/Advisor Project (CAP)

• Health Benefits Security Project (HBSP)

– Established in FY 2012, the Health Benefits Security Project (HBSP) is EBSA’s comprehensive national health enforcement project, combining EBSA’s established health plan enforcement initiatives with the new protections afforded by PPACA. The HBSP involves a broad range of healthcare investigations, including examinations for compliance with ERISA Part 7 and PPACA.

Scare Tactics

Scare Tactics

2,300,000 Plans / 400 Investigators = 5,750 Plans per Investigator

5,750 Investigations X 2 Days per Investigation = 11,500 Days

11,500 Days / 365 Days per Year = 31.5 Years!

Enforcement Strategy

Sources of Cases (almost never disclosed):

• Participant complaints

• Form 5500 Reviews

• Referrals from other agencies

• Media

• Other

– National Projects

– “Random” Investigations

• HDCI I & II

General ERISA Compliance• Plan document.

• Summary Plan Description (SPD), including any changes in Plan benefits and entitlement to benefits.

– WRAP Plan?

– Electronic Disclosure Safe Harbor Rules

• Scope and Duties

• Written Consent

• Enrollment package provided at open enrollment and to new hires, including front and back of all enrollment forms

• All documents related to contracts, policies or arrangements with all providers of service to the Plan, including, but not limited to, insurance companies, administrator(s), auditors, attorneys, brokers, utilization review organizations and record keeping/data processing vendors.

General ERISA Compliance• An "Employee Welfare Benefit Plan" [ERISA § 3(1); DOL Reg. § 2510.3-1] is

– Any plan, fund, or program established or maintained by an employer or by an employee organization, or by both, which provides any of the following benefits, through insurance or otherwise -

• health insurance

• group life insurance

• long-term disability income

• severance pay

• funded vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services

General ERISA Compliance• For purposes of Title I of [ERISA], the term “employee welfare benefit plan”… shall not

include a group or group-type insurance program offered by an insurer to employees…under which

– (1) no contributions are made by an employer or employee organization;

– (2) participation in the program is completely voluntary for employees or members;

– (3) the sole functions of the employer or employee organization with respect to the program are, without endorsing

the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and remit them to the insurer; and

– (4) the employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs

General ERISA Compliance• Summary of Benefits and Coverage (SBC), Notices of Material

Modifications, and Uniform Glossary.

• If self-insured, all contracts for claims processing, administrative services, and reinsurance.

• A copy of the Plan’s rules for eligibility to enroll under the terms of the Plan (including continued eligibility).

• A copy of the written procedures that provide special enrollment rights to individuals who lose other coverage and to individuals who acquire a new dependent, if they request enrollment within 30 days of the loss of coverage, marriage, birth, adoption, or placement for adoption, including any lists or logs an administrator may keep of issued notices.

• A copy of the written appeal procedures established by the Plan and copies of any denied appeals.

General ERISA Compliance• A copy of the Plan’s rules regarding coverage of medical/surgical and mental

health benefits, including information as to any aggregate lifetime dollar limits and annual dollar limits (MHPA/MHPAEA)

• The Plan’s Newborns’ Act notice (this should appear in the plan’s SPD), including lists or logs of notices an administrator may keep of issued notices.

• A copy of the Plan’s rules regarding pre-authorization for a hospital length of stay in connection with childbirth.

• A sample of the written description of benefits mandated by WHCRA required to be provided to participants and beneficiaries upon enrollment.

• If a Participant resides in a state with a Children's Health Insurance Program ("CHIP") offering premium assistance, provide the notice informing Participants of possible eligibility for premium assistance;

General ERISA Compliance

• COBRA Policies/Procedures– Notices (Initial and Qualifying Event) – updated post-ACA

– Method for premium determinations

– Annual OE rights

– One of the main sources for Paricipant complaints!

General ERISA Compliance• Materials describing any wellness programs or disease management

programs offered by the plan. If the program offers a reward based on an individual’s ability to meet a standard related to a health factor, the plan should also include its wellness program disclosure statement regarding the availability of a reasonable alternative.

– Big point of emphasis!

– Regulations now under ACA, HIPAA, GINA, ADA (DoL and EEOC)

– Two kinds of wellness programs:

• Participatory wellness programs

• Health-contingent wellness programs (outcomes-based)

– Regulations have increased the maximum reward under a health-contingent wellness program from 20% to 30% of the cost of coverage and further increased the maximum reward to 50% for wellness programs designed to prevent or reduce tobacco use – but other EEOC limits may apply if genetic information is asked/obtained.

General ERISA Compliance• If the Plan is claiming or has claimed grandfathered health plan status within

the meaning of section 1251 of the Affordable Care Act:

– A copy of the grandfathered health plan status disclosure statement

– Records documenting the terms of the Plan in effect on March 23, 2010 and any other documents necessary to verify, explain or clarify status as a grandfathered health plan.

• If the Plan is NOT claiming grandfathered health plan status under section 1251 of the Affordable Care Act:

» A copy of the choice of provider notice informing participants of the right to designate any participating primary care provider, physician specializing in pediatrics in the case of a child, or health care professional specializing in obstetric or gynecology in the case of women, and a list of participants who received the disclosure notice.

» If the Plan provides any benefits with respect to emergency services in an emergency department of a hospital

» Copies of documents relating to the provision of preventive services

» Copy of the Plan’s Internal Claim and Appeals and External Review Processes.

» Copies of a notice of adverse benefit determination, notice of final internal adverse determination notice, and notice of final external review decision.

» If applicable, any contract or agreement with any independent review organization or third party administrator providing external review.

General ERISA Compliance

• The Plan's accounting records, including bank statements, trust, and brokerage statements and canceled checks [bank transaction reports may be used if a bank trustee controls the assets]

• Documents identifying Plan assets, liabilities, revenues and expenses.

• The Plan's Form 5500 Annual Reports with attachments, e.g. Schedules SSA, from January 1, 2013, through the present.

• The Summary Annual Reports as distributed to participants from January 1, 2013, through the present.

• The Fiduciary liability insurance policy and Fidelity (fraud and dishonesty) bond, if applicable

General ERISA Compliance

• Medicare Creditable Coverage Notices– By October 15th, annually

• CMS Disclosures– Within 60 days of the end of the plan year (March 1, 2018 for a calendar-year plan)

Why Us?• What are they looking for?

– Reporting and Disclosure Violations

– Fiduciary Violations:

• Fiduciary must

– Act “solely in interest” of Participants/Beneficiaries

– Discharge his / her / its duties prudently

– Follow terms of governing documents (to the extent consistent with ERISA)

• Fiduciary must not:

– act in his / her / its own self interest

– act on behalf of a party with adverse interests

– accept “gratuity” from those doing business w/ the Plan (kickback)

– cause the Plan to engage in a “prohibited transaction”

» Watch out for Participant Contributions!

Resolutions

• Depending upon the circumstances, EBSA may seek:

– Correction of prohibited transactions

– Restoration of losses

– Penalties

– Removal of fiduciaries

– Removal of service providers

– Appointment of independent fiduciary

– Implementation of new internal controls

• May lead to IRS Referral for excise taxes, or federal/local prosecutors for criminal offenses.

Preparing for/Avoiding of Investigations

Preparation

• The best way to avoid a DoL Investigation is to stay off of their radar!

– Do what you are supposed to be doing, and do it all the time!

– Self‐audit in advance - most of the checklists the DoL use are available on the EBSA website. Build the correct foundation and it is easy to move up from there.

– Don’t rely 100% on vendors to get it right – it’s still YOUR responsibility to make sure they do everything correctly and they you are choosing vendors correctly.

Preparation

• If you are chosen:

– Gather all documents ahead of time

• Know what to give, when to give it – but have everything ready to go

– Be professional – most Investigators want to get in/out as quickly as possible

– Be patient – Investigations aren’t closed overnight

– Be prepared – they will probably find something

Preparation

• Voluntary Fiduciary Correction Program (VFCP)

– Allows Plan Officials to correct certain violations before DoL investigates and, if done properly, receive a “No‐Action” letter from the Department.

• Delinquent Participant Contributions to Insured Welfare Plans

• Delinquent Participant Contributions to Welfare Plan Trusts

• Below Market Interest Rate Loans to Parties in Interest

• Below Market Interest Rate Loans to Non-Parties in Interest

• Below Market Interest Rate Loans Due to Delay in Perfecting Security Interest

• Payment of Duplicate, Excessive, or Unnecessary Compensation

• Improper Payment of Expenses by Plan

Preparation

• Voluntary Fiduciary Correction Program (VFCP)

– Designed to be a voluntary program

– No need to consult with EBSA

– Apply after correction

– Neither plan nor applicant “Under Investigation”

– Advantages:

• “No Action” letter (upon completion)

• Avoid DOL investigations

• Avoid ERISA §502(l) penalty (20% penalty on settlement agreements)

• Avoid potential litigation

• In some cases, avoid IRC §4975 excise tax

Preparation• Delinquent Filer Voluntary Compliance Program (DFVCP)

– Designed to be a voluntary program

– For failure to timely file 5500s

• Due by end of 7th month after plan year ends

• Any size pension plan, any welfare plan with more than 100 participants on the first day of the plan year, or self-funded plans of any size if funded from a trust

• Proposed regulations to take welfare filings down to 2 common-law employees.

– Caps total potential penalties at $4000 per plan (vs.$2,063 per day)

Preparation• Delinquent Filer Voluntary Compliance Program (DFVCP)

Other Hot Button Compliance Issues

What did we learn?

Source: Ernst & Young

Miscellaneous ACA

• Other ACA Issues:

– PCORI Fee Payments (2019/2020)

– 1095/W-2 Reporting (new 250 threshold)

– DoL “Marketplace” Notice to Employees (not from HHS)

“Cadillac” Tax• 40% non-deductible excise tax on high-cost health plans

starting in 2026

• Based on actual value of employer-provided health coverage over certain limits

– $10,200 for single coverage

– $27,500 for family coverage

– Higher amounts allowed for retirees or those in “high-risk” professions

– Possible “age and gender” adjustments

• Example: If plan value is $11,200 for single coverage, then the employer would be responsible for $400 per participant in excise taxes

Future guidance expected

Misc. HR Items

• Always beware of FMLA issues

• FLSA Issues (watch out for your employee handbook & “concerted” activities)

• WARN Act Requirements

• Unpaid OT Lawsuits/Wage & Hour Issues

• EEOC/ADA Complaints

• OSHA Complaints

Resources

https://www.dol.gov/agencies/ebsa

www.healthcare.gov/

https://www.irs.gov/affordable-care-act/employers

For Current and Prospective Higginbotham ClientsOnly. No Reproduction Without Prior Authorization.The material is for general informational purposesonly and does not constitute medical or legaladvice. This information is not intended tosubstitute for obtaining legal advice from anattorney. No person should act or rely on anyinformation in this presentation without seeking theadvice of an attorney. The material is notguaranteed to be correct, complete or up to date.