Smart Benefits: 5 Common Compliance Mistakes Employers Make

Monday, March 17, 2014

Amy Gallagher, GoLocalWorcester Business/Health Expert

Employers must comply with a myriad of federal regulations when it comes to employee benefits. In fact, there are more than 100 regulations related to ERISA, DOL, PPACA, HIPAA, COBRA, FMLA and Medicare, among others.

Some employers have difficulty staying abreast of all the rules while others don’t think certain laws apply to them because of their size. The result? Many employers overlook key regulations – risking financial penalties for non-compliance.

Here are five commonly missed requirements:

1. WRAP Plan Documents and Summary Plan Descriptions (SPDs). All employers, regardless of size and whether fully insured or self-funded, must create and maintain plan documents on file. These are not the same as the carrier master contracts, certificates of coverage or benefit plan descriptions – which don’t meet the requirements set forth by ERISA or DOL. Instead, employers must have a WRAP plan document and a summary plan description that bridge the gaps within the carrier documents, and allow filing of 5500s under one umbrella plan. The plan document must be made available to any employee who requests to review it, and the summary plan description must be distributed to all employees. And any material modifications to benefits must be captured in these documents and communicated to employees within required timeframes.

2. 5500 Filings . Any employer with 100 or more participants in a plan must file annual 5500 filings with the IRS. These filings show how much money is spent on insurance premium, how many participants are in a plan, and how much of the premium is paid to a broker or consultant, among other required information. This rule applies to each medical, dental, vision, life and disability plan that has more than 100 participants. Employers who are behind in filing can apply for the delinquent filers program, which carries reduced penalties and can help employers get up-to-date with compliance.

3. COBRA . For employers with more than 20 employees, COBRA applies for participants who lose medical and dental coverage. It also applies for Flexible Spending Accounts, Health Reimbursement Arrangements and even wellness programs, so these benefits may need to be offered to COBRA-eligible participants, too. The employer must calculate a COBRA working rate – increased by each benefit that applies – and provide it to the participant.

4. Annual Discrimination Testing. Annual discrimination testing must be done for Cafeteria 125 plans, including medical and dependent care Flexible Spending Accounts, Health Reimbursement Arrangements and premium-only plans, to show that higher wage earners and key employees are not receiving special treatment in these areas, and lower wage employees are not be discriminated against on the basis of accessing these benefits.

5. Health Insurance Market Place Exchange Notice . While most employers knew this initial notice needed to be distributed to employees by October 1, 2013, in preparation for the new state and federal healthcare exchanges that opened January 1, 2014, many employers don’t realize that this is an annual requirement. That means the notice needs to be distributed by October 1st each year going forward.

Employers shouldn’t take risks when it comes to benefits compliance. To ensure they’re meeting the requirements, they should seek guidance from attorneys or benefit advisors, or perform proactive compliance audits to check for areas where help is needed. That way, employers can address issues and be prepared in case of a DOL audit.

Amy Gallagher has over 21 years of healthcare industry experience guiding employers and employees. As Vice President at Cornerstone Group, she advises large employers on all aspects of healthcare reform, benefit solutions, cost-containment strategies and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, and is often quoted by national publications on the subject matter. Locally, Amy is a member of SHRM-RI, the Rhode Island Business Group on Health, and the Rhode Island Business Healthcare Advisory Council.

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