WHAT ADVISORS NEED TO KNOW:
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Transcript of WHAT ADVISORS NEED TO KNOW:
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WHAT ADVISORS NEED TO KNOW:
A "TOP FIVE" LIST OF COMPLIANCE CHALLENGES FOR HEALTH AND WELFARE
PLAN SPONSORS
Dan Bond, PrincipalCapstone Benefits Group
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Challenge #1: Liability
• Myriad of federal laws apply to employer-sponsored welfare benefit plans
– ERISA
• Reporting (Form 5500, Form M-1)
• Disclosure (SPDs, SMMs, new SBC)
– COBRA (general notice, election notice)
– HIPAA (creditable coverage notice, notice of special enrollment rights, privacy notice)
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Liability– Internal Revenue Code (Section 125
regulations, nondiscrimination requirements)
– Medicare (MSP compliance, coordination of benefits, Section 111 mandatory reporting, Part D notices/reporting)
– PPACA (eligibility and coverage mandates, internal claims and external review requirements, participant disclosures, W-2 reporting and Summary of Benefits and Coverage begin in 2012)
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Liability• General Rule: The plan sponsor (the
employer) is responsible for compliance with these federal laws and regulations
– Plan sponsor is “plan administrator” and “named fiduciary” under ERISA unless another party is appointed for this purpose
– Many fiduciary obligations cannot be delegated
– ERISA will look beyond contractual designations to actual duties in determining fiduciary liability; co-fiduciary liability commonly results
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• Over Reliance On:– Third Party Administrators– Insurance Companies– Vendors
• Perception of responsibility does not match actual legal obligations
• Gaps inevitably result
Liability
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Liability: Action Steps
• Identify roles and boundaries
1. Employer
2. Service Providers
3. Advisor
Reflect these in written client agreement (define your role in compliance and what liabilities you are willing to assume)
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Liability: Action Steps
• Identify gaps and provide solutions
1. Referral to Legal Assistance
2. Administration Services
3. Compliance Tools
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Challenge #2: Eligibility Administration
• Eligibility “gaps” are common and can be costly to employers
• Gaps result from inconsistencies between employer policies/administrative practices, insurance contracts, and plan documents– If employer promises coverage to employee
who is not eligible under criteria in insurance contract or self-funded plan document, insurer can deny claims, stop-loss carrier can deny reimbursement
– Employer may be “on the hook” regardless of the availability of insurance coverage or stop-loss reimbursement due to contractual promise to provide benefits
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Eligibility Administration• Common mistakes that create gaps
– Failure to clearly define eligible employees
• Example: insurance contract/plan document will have minimum hours requirement for eligible employee, but employer defines multiple job classifications (such as salaried or commissioned employees) as eligible without minimum hours requirement
– Failure to clearly define eligible dependents
• Example: eligible dependents (including spouse, domestic partner, children) are defined in insurance contract/plan document, but employer defines differently (or not at all)
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Eligibility Administration
– Failure to address inconsistencies between employer leave of absence policies and plan provisions
• Example: insurance contract/plan document extends eligibility for employees who are not actively working only for FMLA leaves of absence, but employer’s personnel policies permit longer or non-medical LOAs along with continued eligibility
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Eligibility Administration
– Failure to monitor and enforce eligibility rules as required by insurance contract/plan document
• Examples:
– Employer does not seek documentation for spouse or domestic partner
– Employer does not require proof of continuing disability
– Employer does not remove terminated employees or dependents who lost eligibility from coverage
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Eligibility: Action Steps
• Ask clients the right questions
• How is eligibility defined in HR resources?
–Handbook–Enrollment materials
• What are employer’s LOA policies and practices
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Eligibility: Action Steps
• Coordinate employer plans and policies
• Insurance contracts
• Plan documents
• Secure approval from carriers!
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Challenge #3: Health Care Reform
• “PPACA” eligibility and coverage mandates apply to all employer-sponsored health plans and health insurance policies
– Many mandates directly impacting plan provisions are already in effect
– How mandates impact a particular health plan still depends on maintaining grandfathered plan status
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Health Care Reform
• Grandfathered plans must revisit whether status maintained with each plan design/cost change (remember required disclosure on all written materials
– If grandfathered plan status is lost:
• Include first-dollar preventive care, incorporate “patient protections”
• Incorporate new internal and external claims review process
• Fully-insured plan Section 105(h) compliance (after IRS issues guidance)
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Health Care Reform2012
• Health cost reporting on 2012 W-2s
• Comparative Effectiveness Research Fees
• Medical Loss Ratio Rebate
• Summary of Benefits and Coverage
2013
• $2500 health FSA limit
• Elimination of Retiree Drug Subsidy Deduction
• Health Benefit Exchange notices
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Health Care Reform:
Action Steps
• Monitor status of Supreme Court decision (expected June/July of 2012)
• Provide consistent communication
• What has taken place
• What is on deck
• What is down the road
• Where does your client stand
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Health Care Reform:
Action Steps
• Revisit your clients’ grandfathered plan status upon renewal
• Re-educate clients on practical impact of grandfathered status
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Health Care Reform:
Action Steps
• Assist clients in getting resources in place for 2012 and 2013 requirements
• W-2 reporting
• Summary of Benefits and Coverage
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Health Care Reform:
Action Steps
• Begin to put future requirements on employers’ radar
2014Exchanges, New Reporting, PCE
Prohibition, Pay/Play Penalty, Annual Limits, Cost Sharing Limits, etc.
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Challenge #4: Plan Documentation
• ERISA § 402 requires a “written instrument” in order to “establish” a employee welfare benefit plan – this written instrument is commonly called the plan document
• Certain details must be included in the plan document in order to comply with ERISA
• Applies to employer-provided welfare benefit plans regardless of size or funding mechanism unless exempt from ERISA (e.g.. government or church plans)
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Plan Documentation
• Plan document must include:– Funding policy and method
– Procedure of allocation of responsibility for plan operation and administration
– Amendment procedure/authority
– Basis for plan payments (triggering events for receipt of benefits)
– One or more named fiduciaries for plan operation and administration (defaults to plan sponsor, not claims administrator or insurer)
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Plan Documentation
• ERISA § 101 requires the ERISA plan administrator to furnish a summary plan description (“SPD”) to plan participants
• Per DOL, SPD is “primary vehicle” for informing participants of plan rights and benefits
• ERISA and DOL regulations specify content of SPD – not state insurance regulations
• Insurer-prepared certificates meet insurer’s obligations under state law and are not modifiable due to state regulatory filing/approval requirements
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Plan Documentation• Named “Plan Administrator”
under ERISA is legally responsible for preparing and distributing SPDs
– This will almost always be the employer/plan sponsor
– The Plan Administrator is not the TPA or insurer unless formally designated in plan document and service agreement (uncommon)
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Plan Documentation• Compliance gaps develop because
employers and advisers rely on insurance policy and certificates to serve as written plan document and SPD
– Insurers prepare policies and certificates in accordance with state insurance law, but often ignore group policyholder’s ERISA obligations
– Policies and certificates often do not contain all DOL requirements, and do not reserve right to amend/terminate plan or otherwise protect employer from liability for payment of benefits
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Plan Documentation• DOL relies on existing plan
documentation to determine number of welfare plans an employer maintains
– If employer sponsors several insured welfare benefits under separate insurance policies, DOL considers each separately-documented benefit as a “plan”
– Separate Form 5500s should be filed unless documentation combining all benefits into single plan is maintained; filing single Form 5500 without documentation risks nonfiling penalties
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Plan Documentation• IRC §125 requires an employer to
adopt a written plan if pre-tax salary reductions (premium, health or dependent care FSAs, HSA contributions permitted)– Welfare benefit documents (plan documents,
insurance policies, and SPDs) are not Section 125 plan documents
– A separate written plan in compliance with Prop. Treas. Reg. § 1.125-1 is required or plan loses tax qualified status and all pre-tax payments become taxable
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Documentation:
Action Steps
• Add value to the process by providing access to resources to fill the documentation gaps
• Summary Plan Descriptions (SPD)
• “Wrap” Document
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Documentation:
Action Steps
• Add value to the process by providing access to resources covering health care reform changes
• Summary of Benefits and Coverage
• Material Modifications
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Challenge #5: Reporting and Disclosure
• ERISA and DOL regulations contain specific reporting and disclosure obligations
– Annual Form 5500 obligation required for all welfare plans with 100+ employee participants on the first day of the plan year or if “funded” (through trust or segregated account containing plan assets)
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Reporting and Disclosure• Summary Annual Report (“SAR”)
must be distributed to participants 2 months after Form 5500 deadline
• Plan documents and SPDs need not be filed or otherwise reported to DOL or IRS unless specifically requested, but must be provided to participants within 30 days of a request or statutory penalties could result ($110 per day under ERISA § 502)
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Reporting and Disclosure• Participant disclosures required
for group health plans– General COBRA notice
– USERRA rights disclosure
– HIPAA portability (special enrollment and PCEs) disclosures
– NMHPA and WHCRA disclosures
– QMCSO disclosure
– Michelle’s Law disclosure
– Grandfathered plan and “patient protections” disclosure
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Reporting & Disclosure:
Action Steps
Failure to provide many required group health plan disclosures creates $100 per day excise tax penalty for each affected participant!
Failure to properly file a Form 5500 can lead to a penalty assessment by DOL of $1,100 per plan, per day!
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Reporting & Disclosure:
Action Steps
• Understand definitions and identify ERISA Plans
• Medical
• Dental
• Vision
• Life
• Disability
• Health FSA
• Severance Benefits
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Reporting & Disclosure:
Action Steps
• As noted earlier, identify roles and boundaries to ensure all notices and disclosures are covered
1. Employer
2. Service Providers
3. Advisor
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Reporting & Disclosure:
Action Steps
• Add value to the process by providing access to resources that trigger notices and disclosures, and serve to avoid potentially expensive penalties