Amending (Again) Clients’ Wrap Plans for the ACA · Amending Clients’ Wrap Plans for the ACA...

Amending (Again) Clients’ Wrap Plans for the ACA

August 2015

Amending Clients’ Wrap Plans for the ACA

Understanding wrap plans

o Wrap plans consolidate multiple welfare benefit programs under a single umbrella, a single plan document…in the process they allow for a streamlined Form 5500 filing process, and they add ERISA-required boilerplate language that is sometimes missing from insurer-provided coverage certificates of booklets (thus facilitating compliance with SPD requirements under ERISA

o These multiple benefit programs that are consolidated under the wrap plan umbrella are called ―component programs‖ because they are components of the larger wrap plan

o In the wrap plan documents that Lockton and, after 2011, HuschBlackwell prepared for our clients, the component programs and the eligibility rules that apply to them are described in Appendices:

Component Program Appendix

Eligibility Appendix

This presentation will refer many times to the ―component program appendix‖ or ―component document appendix,‖ and the ―eligibility matrix‖ or ―eligibility appendix.‖

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First step: Go to www.lockton.com/Wrap_Amendment

There you will find:

o An overview of the amendment process, including a guide to help you determine which model amendment document, and other documents, to use

o The model amendment documents (including short forms and long forms of a model amendment for both the Lockton model wrap plan and the HuschBlackwell model wrap plan)

o A PPACA Policy document that will play a significant role in the amendment process

o Other helpful documents, including a Model Language Addendum to assist you with ―long form‖ amendments that require changes to clients’ component programs under the wrap, or changes to eligibility under one or more component programs

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http://www.lockton.com/Wrap_Amendment


A client with a wrap plan might have a Lockton model wrap, a HuschBlackwell model wrap, or a wrap prepared by a prior broker or by the client’s lawyers

A Lockton wrap plan is easy to identify, if you’re not sure that what your client has is a Lockton model wrap document.

o Article I is a ―Definitions‖ section and it looks like this:

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o The Lockton wrap plan has an appendix, designated Appendix I, titled ―Component Documents,‖ and it looks like this (the picture includes the document assembly coding…you won’t see the blue code in the client’s document):

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o It also has an Appendix II, titled ―Administrative Facts,‖ that looks like this:

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o It also has an Appendix II, titled ―Administrative Facts,‖ that looks like this:

o And an Appendix III, titled, ―Eligibility Matrix,‖ that looks like this:

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The HuschBlackwell wrap plans are easy to identify because they have a unique footer in the lower left corner of each page…

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This amendment process – the various model amendment document, etc. – are only for amending a Lockton wrap plan or a HuschBlackwell wrap plan.

If the client has a different wrap plan, perhaps prepared by a prior broker or its attorneys, and wants us to amend that, please discuss that with Craig Kovarik at HuschBlackwell. Craig will have some thoughts on how best to proceed (for example, amend the existing plan, or restate it on the HuschBlackwell platform).

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Why These Wrap Plans Need Amending


There are several non-ACA –related changes that will help add clarity, provide additional protection to the plan sponsor, and do other good things…

o For example, place limits on the time a participant is allowed to bring a plan-related lawsuit, etc.

…And some helpful ACA-related changes that really should be adopted by the client…

o For example, add a definition of ―PPACA,‖ add recently-authorized rules regarding retroactive coverage terminations, etc.

More on these changes just a little later…

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Many Employers Subject to the Employer Mandate (and perhaps some smaller

ones that are not)…

o Added new ―component programs‖

New MEC coverage

New Minimum Value coverage

Fixed Indemnity coverage to supplement bare-bones MEC

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New MEC coverage



o Deleted one or more component programs

Fixed indemnity not amounting to MEC

Higher value PPO coverage

Other mini-med coverage

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New MEC coverage







o Established new eligibility rules based on…

Average hours of service…

…Over Measurement Periods, etc.

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New MEC coverage







o Established new eligibility rules based on…

Average hours of service…

…Over Measurement Periods, etc.

o Established new rules regarding loss of coverage

End of a stability period following a measurement period from which the employee does not emerge as FT

What do we do for mid-stability period transitions to PT status? When does the COBRA coverage right arise in a case like that?

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The Good News!....

For clients who did NOT make these latter changes (i.e., did not make changes to component programs or eligibility), this amendment process is very simple!

The complexity is greater for employers who have made changes in plan offerings and/or eligibility rules on account of the ACA’s employer mandate or otherwise o E.g., small employers not subject to the employer mandate but

that made changes to programs or eligibility, larger employers that are subject to the mandate but who made these changes for other reasons…)

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The Good News!....

For clients who did NOT make these latter changes (i.e., did not make changes to component programs or eligibility), this amendment process is very simple!

The complexity is greater for employers who have made changes in plan offerings and/or eligibility rules on account of the ACA’s employer mandate or otherwise o E.g., small employers not subject to the employer mandate but

that made changes to programs or eligibility, larger employers that are subject to the mandate but who made these changes for other reasons…)

We suspect that MANY of your clients did not make or need to make material changes to their offerings or eligibility rules to conform to the ACA…this Amendment will be an easy proposition for them (and you), with respect to their respective wrap plans

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The Approach to the Amendment


The General Approach:

o We decided not to hard-wire things like measurement, administrative and stability periods into plan document language…when we do that, it complicates changing those things later…

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o Rather, we decided to have the plan refer, for these issues, to an ancillary ―PPACA Policy Document‖ (the formal name is the ―Policy Document for Full-Time Employee Determinations Under the Patient Protection and Affordable Care Act‖)

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o Rather, we decided to have the plan refer, for these issues, to an ancillary ―PPACA Policy Document‖ (the formal name is the ―Policy Document for Full-Time Employee Determinations Under the Patient Protection and Affordable Care Act‖)

o Then, we are rather general in that Policy Document too, to give the employer maximum flexibility and something it can amend easily, and even use to refer to other ancillary documents

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Three separate documents related to the Amendment

o You’ll use two of them in every case…except perhaps for a customer too small for the employer mandate

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Documents 1 and 2: The wrap amendment (short and long forms)

o Short Form: A ―short form‖ version to accomplish the easy amendment…where there are no changes to component programs or eligibility, and

o Long Form: A ―long form‖ version to handle the more complicated amendments, the ones involving changes to component programs and/or eligibility rules

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We will assist you with the long form amendments – the complicated ones – to the best of our ability and capacity!!!







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We will assist you with the long form amendments – the complicated ones – to the best of our ability and capacity!!!

If you want to give the long form amendments a go yourself, there is a “Model Language Addendum” with the Amendment packet that offers helpful model language for completing your long form amendment


Document 3: The PPACA Policy Document and Optional Appendix

o Addresses ACA issues, but leaves the employer maximum room to maneuver…i.e., maximum flexibility, for ease of administration

o The wrap plan amendment refers to the PPACA Policy Document

Refers to the employer’s ability to apply ACA-related rules to certain cohorts of employees

Refers to the employer’s right to count hours of service, for FTE determinations under the ACA, in certain ways

Refers to the employer’s designation of measurement, administrative and stability periods and right and intent to articulate them in other documents (and change them from time to time)

Refers to the employer’s right to determine minimum value in any way permitted by the ACA, and to determine affordability by using safe harbors

Refers to the employer’s right to make offers of coverage to FTEs, to apply ―break in service‖ rules, etc.

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Note: There’s an Optional Appendix to the PPACA Policy Document

o Allow the employers who want to do so, to get more specific

o Some employers will want to use the ancillary PPACA Policy Document as an aid to help them administer the plan, a document that actually DOES describe specific cohorts of employees subject to specific measurement, administrative and stability periods, etc.

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Note: There’s an Optional Appendix to the PPACA Policy Document

o Allow the employers who want to do so, to get more specific

o Some employers will want to use the ancillary PPACA Policy Document as an aid to help them administer the plan, a document that actually DOES describe specific cohorts of employees subject to specific measurement, administrative and stability periods, etc.

To which employees does this particular Appendix apply?

FTE determination methods (monthly or look-back)

How to count hours of service for non-hourly employees

Specific initial measurement, administrative and stability periods

Specific standard measurement, administrative and stability periods

Breaks in service and the ―rule of parity‖

Effective date for the particular Appendix

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Which Documents Do You Use?

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If the plan sponsor did not add, delete or modify coverage options (for ACA or other purposes), or modify eligibility rules (for ACA or other reasons)…that is, if you don’t need to tinker with the component program or eligibility appendices:

Use:

The short form amendment…and

The PPACA Policy for Full-Time Employee Determinations (and optional Appendix)

Which Documents Do You Use?

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If the plan sponsor did not add, delete or modify coverage options (for ACA or other purposes), or modify eligibility rules (for ACA or other reasons)…that is, if you don’t need to tinker with the component program or eligibility appendices:

Use:

The short form amendment…and


If the plan sponsor did add, delete or modify coverage options, or modify eligibility rules – for ACA or otherwise – so that the wrap plan’s component program and/or eligibility appendices need modifying:

Use:

The long form amendment (we’ll help you, as needed)…and


Let’s Get After It: The Documents Themselves and the Amendment Process

The Short Form Amendment

The Amendment Process: The Short Form Amendment

Remember, the ―Short Form Amendment‖ is what to use for the client that did not make changes to coverage options (―component programs‖) or eligibility, and therefore does NOT need to amend the appendices dealing with them

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Remember, the ―Short Form Amendment‖ is what to use for the client that did not make changes to coverage options (―component programs‖) or eligibility, and therefore does NOT need to amend the appendices dealing with them

Insert the Plan name from the cover of the wrap plan (e.g., ―ABC Company Comprehensive Health and Welfare Benefit Plan‖) in these two places…

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Here’s what the HuschBlackwell short form amendment document looks like…

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Numbered paragraphs 1-8 of the Amendment are largely unrelated to the ACA or, where related, should be added to the Plan to provide the Plan Sponsor with additional flexibility or protection.

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We recommend these changes be made even if the employer is making no other changes (i.e., is not adding, deleting or modifying a component program or its eligibility)

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Here are the changes in numbered paragraphs 1-8…

1. Amends the Plan’s definition of ―Employee‖ to avoid having to provide coverage retroactively to an individual not currently treated as an employee (and therefore not eligible) but later determined to be an eligible common law employee…

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Here are the changes in numbered paragraphs 1-8…

1. Amends the Plan’s definition of ―Employee‖ to avoid having to provide coverage retroactively to an individual not currently treated as an employee (and therefore not eligible) but later determined to be an eligible common law employee…

Insert the effective date of this change…typically, the date the employer mandate applies to the employer

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Here’s what the HuschBlackwell document looks like…

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Here are the changes in numbered paragraphs 1-8 (continued)…

2. Adds a definition of ―PPACA‖

3. Clarifies when, under the ACA, the Plan may terminate coverage retroactively (in accordance with federal FAQs)

4. Eliminates a rule regarding nondiscrimination; the provision is largely redundant with another nondiscrimination provision

5. Provides that if an affiliated employer makes contributions toward benefits under the Plan, it will be deemed to have formally adopted the Plan (sometimes employers forget to sign formal adoption agreements)

6. Clarifies a Plan provision addressing coordination with workers’ comp programs

7. Establishes a sort of ―statute of limitations‖ for bringing actions against the plan

8. Provides for indemnity protection for employees who help administer the plan, like a benefits committee

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The Amendment Process: Short-Form Amendment (COBRA)

Page 4 of the Amendment – what would be paragraph #9 -- addresses a change to the Plan’s COBRA rules

The explanation is in the red text…this change is designed to deal with a situation where due to a reduction in hours during a stability period, eligibility will be lost at the beginning of the next stability period

o Sponsors likely won’t want to cut off eligibility for the employee upon the reduction in hours. The employee is likely considered ―full-time‖ for employer mandate purposes, based on average hours over the prior measurement period. Cutting off eligibility during the current stability period risks employer mandate penalties

o Under COBRA rules, if an employee loses eligibility within 18 months following a reduction in hours, the reduction in hours is considered the qualifying event, triggering the obligation to issue a COBRA election notice

o That would confuse the employee (and the employer!)

o COBRA allows the plan to treat the later loss of eligibility as the qualifying event…that makes more sense…

o That’s what the amendment accomplishes, if the employer wants to adopt this change

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If the Plan Sponsor wants to adopt this change – we think most should — insert a paragraph number (the next number in order) and…

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…insert an effective date, typically the date the employer mandate applied or applies to the employer, and…

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Make sure the employer’s HR/benefits team and the plan’s COBRA vendor understand that the COBRA notice should be distributed upon the end of the stability period, and that the 18-month COBRA period (if COBRA is elected) begins then

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Make sure the employer’s HR/benefits team and the plan’s COBRA vendor understand that the COBRA notice should be distributed upon the end of the stability period, and that the 18-month COBRA period (if COBRA is elected) begins then

We’ve made a model letter to the client and its COBRA vendor available here, and on the Wrap Plan Amendment webpage where the various amendment documents are housed…

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Here’s what the HuschBlackwell document looks like…

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And that’s it, for the Short Form Model Amendment document!

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Remove the red text, remove paragraphs that don’t apply, make sure the pages look good and break in the correct place…

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Client should date and sign, ideally before the end of the first plan year to which the employer mandate applies

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Client should sign, ideally before the end of the first plan year to which the employer mandate applies

There’s a sample resolution at the end of the model amendment document

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The Long Form Amendment

The Amendment Process: Long Form Amendment

For a Long Form Amendment you use all the foregoing (all the changes in the Short Form Amendment), plus….

Pages 5-6 of the Amendment allow for an amendment to the Component Documents Appendix. This is the Appendix where the Employer identifies the various benefits (―component programs‖) under the wrap plan

Some employers have added and/or deleted component programs to deal with the employer mandate

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If the Plan Sponsor needs to add or delete a Component Program, insert a paragraph number and…

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…an effective date (probably the date the employer mandate applies to the Plan Sponsor), and…

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…an effective date (probably the date the employer mandate applies to the Plan Sponsor), and…

Identify the Component Program being deleted, or added…(next slide)

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The Amendment Process: Component Program Appendix

To delete a Component Program, identify it here, using the name as shown in the current Component Program Appendix

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The Amendment Process: Component Program Appendix

To delete a Component Program, identify it here, using the name as shown in the current Component Program Appendix

To add a Component Program, check a box, add a description (take your lead from how the current Component Program Appendix identifies the Component Programs)

o Add the name of the insurer or TPA, too

Add as many new descriptions as you need

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The Amendment Process: Insert the Plan Name

Here’s what the HuschBlackwell long form amendment document looks like, regarding an amendment to the Component Document Appendix…

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The Amendment Process: Admin Facts/Plan Description Appendix

The Plan’s Administrative Facts Appendix is where the Plan describes, among other things, how it is funded (i.e., through insurance, or with self-funded contributions).

If the Plan Sponsor has installed an insured, or a self-insured, Component Program for the first time, we need to make sure this Appendix makes clear that the Plan now has a fully insured (or, as applicable, a self-insured) Component Program.

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Insert the appropriate effective date…

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…and check the applicable boxes…also check any boxes, as appropriate, on the next page…

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…and check the applicable boxes identify it here, using the name as shown in the current Component Program Appendix…also check any boxes, as appropriate, on the next page…

The HuschBlackwell wrap has more general language than the legacy Lockton wrap, and does not need amending of its ―Plan Information‖ section

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The Amendment Process: Modifying the Eligibility Appendix

The most complicated aspect of a wrap plan’s PPACA amendment involve the Eligibility Appendix (see pp. 7-10 of the Model Amendment)

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If you’re having a go at doing the Long Form Amendment yourself, the Model Language Addendum (available on the webpage where you’ll find the model amendments, etc.) will help guide how you describe eligibility and effective dates, etc.

To the extent we have capacity, we’re happy to assist you here…

More on what’s included in this Model Language Addendum in just a moment…

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If you deleted a Component Program, you’ll need to delete the eligibility rules related to it…

o Insert the names of the Component Programs you’re deleting, and the effective date (likely, the date the employer mandate applied to the employer)

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If you added a Component Program, you’ll need to…

…designate the effective date…

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…identify the program, and…

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…identify the program, and…

…add the eligibility and coverage effective date rules for that program

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If having a go at this yourself, take your lead from how the Plan currently defines eligibility, and then see the Model Language Addendum for help…we can help you too, in tricky situations.

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The Addendum has samples for:

o Eligibility (section 1)

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o Variety of ACA-compliant waiting periods/coverage effective dates for employees (section 2)

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o Coverage effective dates for dependents (section 3)

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o Coverage effective dates for dependents (section 3)

o A helpful description of an employee coverage termination date, where eligibility continues through the end of a stability period (section 4)

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The Amendment Process: Insert the Plan Name

Here’s what the HuschBlackwell document looks like, regarding changes to the Eligibility Appendix/Matrix…

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―Same as Medical‖ changes (Lockton model wrap amendment only)…

o The current version of the wrap might describe a number of Component Programs, starting with medical, and then say (for ancillary programs) that the eligibility rules for the ancillary programs are ―same as medical‖

o If the Plan Sponsor has tinkered with the medical eligibility, to expand it to employees averaging 30 hours per week, the Sponsor might not want to expand eligibility for all the ancillary programs…but the ―same as medical‖ language drives just that result

o So…we need to change the eligibility rules for these ancillary programs…probably to reflect the old medical eligibility rules…

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―Same as Medical‖ changes…

o First, identify the Component Programs that currently describe eligibility as ―same as medical,‖ where we need to change that…

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o …insert the effective date of the change…

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o …insert the effective date of the change…

o …then, describe the eligibility rule for these programs. This might be easy…you might simply have to copy the medical program’s old eligibility language, for example

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And that’s it, for the long-form model amendment document!


Client should sign, ideally before the end of the first plan year to which the employer mandate applies

There’s a sample resolution, at the end of the model amendment document

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The PPACA Policy Document


Not much to do here

Read it…so you’re familiar with it

Just two things to do…

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Not much to do here



o Insert the employer’s name…

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Not much to do here




o Insert the effective date.

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Not much to do here




o Insert the effective date.

HERE’S THE IMPORTANT POINT…

o THE CLIENT SHOULD ADOPT THIS POLICY WHETHER CREATING THE SHORT FORM OR LONG FORM…(even if the employer is too small to be subject to the employer mandate, it could still adopt this Policy…the Policy won’t take effect until the employer mandate applies to the employer)

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―The Devil in the Details‖ – The Optional PPACA Policy Document Appendix

The PPACA Policy Document Appendix

Some clients might WANT specific details about things addressed very generally in the PPACA Policy Document

o Like measurement, administrative and stability periods…what are the dates?

o Payroll period rules…

The PPACA Policy Document Appendix addresses six topics…

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Allows employer to designate discrete cohorts of employees to whom this particular Appendix will apply

The employer might need multiple appendices like this, if it wants to specify different measurement, administrative and stability periods for different cohorts of employees

o Different bargaining units

o Employees in different states

o Hourly vs. salaried

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Allows employer to designate discrete cohorts of employees to whom this particular Appendix will apply

The employer might need multiple appendices like this, if it wants to specify different measurement, administrative and stability periods for different cohorts of employees

o Different bargaining units

o Employees in different states

o Hourly vs. salaried

The method (monthly, or look-back) used to determine FTE status

o Most employers will use the look-back method, of course

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How hours of service are counted for non-hourly employees

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How hours of service are counted for non-hourly employees

Initial Measurement, Administrative and Stability Periods

o This can get a little tricky

o Note the option for an 11-month initial measurement period and 12-month initial stability period

o Read the options and the footnotes

o Call or email with questions

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Standard Measurement, Administrative and Stability Periods

o Read the options…and the footnotes

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Rule of Parity

o The Rule of Parity is the rule that says, if you have no hours of service for at least 4 weeks, but fewer than 13 weeks (26 weeks for employees of educational organizations), and more weeks than you had before your break began…then when you come back you’re treated as a new hire, for ACA purposes

o Default option under the Amendment is that the employer may use it…but it’s complicated, and the employer might screw it up…so the employer may choose to say, ―No, we’re not going to do that‖ by checking the box

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Effective Date of the Appendix

o The employer might want to amend the Appendix from time to time, or add a new one (add or change measurement periods for a specific cohort of employees, for example)…

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Effective Date of the Appendix

o The employer might want to amend the Appendix from time to time, or add a new one (add or change measurement periods for a specific cohort of employees, for example)…

o So, we need to insert an effective date for the Appendix. Generally, we can describe the effective date so that the Appendix applies to, for example, FTE determinations for a given stability period. But where the employer wants to describe the effective date differently, it can check the second of the two boxes and describe the effective date.

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Next Steps

Next Steps

Each team should identify its clients with either a Lockton legacy model wrap plan, or a HuschBlackwell model wrap plan

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Next Steps


Determine whether the client has made or is making changes to its component benefit programs under the wrap (for ACA purposes or otherwise), or eligibility for coverage under one or more programs (for ACA purposes or otherwise)

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Next Steps



If all the client needs is the ―short form‖ amendment, prepare that document (along with the PPACA Policy Document and optional Appendix)

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Next Steps




If the client needs a ―long form‖ amendment, either take a stab at that (along with the PPACA Policy Document and optional Appendix), or connect with us for assistance…the process will move faster if you identify precisely what the client has added, deleted and/or changed, with respect to component benefits and/or eligibility

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Next Steps




If the client needs a ―long form‖ amendment, either take a stab at that (along with the PPACA Policy Document and optional Appendix), or connect with us for assistance…the process will move faster if you identify precisely what the client has added, deleted and/or changed, with respect to component benefits and/or eligibility

If the client also had a Lockton or HuschBlackwell cafeteria plan, prepare the model cafeteria plan amendment to address recent ACA-related changes to qualifying events, and present that to the client at the same time you present the wrap plan amendment

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Questions? Call or email your Compliance Services attorney

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Amending (Again) Clients’ Wrap Plans for the ACA · Amending Clients’ Wrap Plans for the ACA...

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