Severance plans: How savvy employers can stay ERISA compliant
How can employers’ severance plans stay ERISA compliant? There are significant advantages associated with ERISA severance plans. Continue reading to learn more.
An employer’s promise to provide severance benefits may be written or oral, formal or informal, and individual or group. Determining whether an ERISA plan already exists, or whether an employer wants its severance arrangement to be subject to ERISA, is an important consideration in determining an employer’s obligation and liabilities associated with a severance arrangement.
There are significant advantages associated with a severance arrangement that is an ERISA plan as discussed in detail below. An employer, however, cannot unilaterally decide that the severance arrangement is an ERISA plan. Instead, an employer, when designing and administering a severance arrangement, can take definitive steps to ensure that the arrangement is treated as an ERISA plan.
Employers may assume that the first step to ensure the existence of an ERISA plan is to have a written plan document, which is required by ERISA. Surprisingly, this is not necessarily determinative as to whether an ERISA plan exists. Courts have held that ERISA plans can exist without a written plan document and vice versa.
Case law has provided the broad outlines of the nature of an ERISA-governed severance plan. An essential characteristic of ERISA severance plans is that, by their nature, they necessitate “an ongoing administrative scheme.” Courts have looked at the following indicators when determining what constitutes an ongoing administrative scheme:
- The employer’s discretion in determining (1) eligibility for benefits or (2) available plan benefits
- The form of payment such as lump sums versus periodic payments
- Any ongoing demand on the employer’s assets such that there is an ongoing scheme to coordinate and control the distribution of benefits
- Calculations based on certain factors such as job performance, length of service, reemployment prospects, and so forth.
Severance plans or arrangements that normally do not require an ongoing administrative scheme, and therefore, do not implicate ERISA, are plans that have lump-sum payments that are calculated under a formula and are mechanically triggered by a single event (such as termination). Where severance payments are made over time (through payroll, for example) and/or additional benefits (such as continuation of benefits or outplacement services) are provided, the severance arrangement is likely subject to ERISA.
As a practical matter, whether severance arrangements are ad hoc or recognized in a formal plan document, they may end up providing ERISA-covered benefits. In a dispute, an employer generally prefers that ERISA applies because of ERISA’s preemption of state laws. Preemption protects employers from state laws that may favor employees and generally limits the dispute to an ERISA claim for benefits, thereby avoiding the potential exposure to punitive, extra-contractual or special damages under state laws. In addition, ERISA’s claim procedure, which provides a pre-litigation administrative process for dispute resolution, will apply if proper plan language is provided. If employees with a severance claim fail to faithfully follow the ERISA claims procedure, their lawsuits may be dismissed for failure to exhaust administrative remedies.
Typically, the plan document gives the employer, in its capacity as plan administrator, the discretionary authority to interpret the plan’s language and make decisions about the plan. If the employee follows the claim procedures and the claim is denied, the decision-making process of the employer (or its designee) if done properly, is given deferential treatment by a reviewing court. Moreover, in many cases, judicial review is limited to only those matters addressed in the administrative record of the claim. In other words, many federal courts would decline to consider factual matters that were not raised by the employee in the claim procedure process.
Another consideration for the savvy employer is that severance benefits are almost always considered to be “welfare” benefits. Welfare benefits, as opposed to pension benefits, are afforded an extremely low level of protection under ERISA. Essentially, the employer’s exposure as to promised severance benefits is only as broad as its express contractual commitment to them. By appropriately documenting the benefits with “best practices” language (such as specifying that the amendment or termination of benefits may be done with or without advance notice), employers can take advantage of the opportunity afforded by the relatively thin protections provided by ERISA. On the other hand, poor or no documentation of a severance arrangement may leave an employer with difficult-to-prove assertions as to what severance commitments were actually made.
In summary, an ERISA-governed plan provides an employer with significant advantages in litigation. In addition, a severance arrangement subject to ERISA will enjoy the powerful benefits of ERISA preemption and the ERISA claims procedures.
SOURCE: Rothman, J.; Ninneman, S. (3 October 2018) "Severance plans, Part 1: How savvy employers can stay ERISA compliant" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/how-employers-can-stay-erisa-compliant-with-severance-plans
5 reasons to offer a student loan repayment benefit in 2019
Are you looking for ways to help add more value to your talent through your 2019 benefits packages? Continue reading to learn why you should offer student loan repayment as one of your employee benefits.
With human resources managers across the country working to finalize their 2019 benefits packages this month, many are asking themselves: How can we add more value for our talent and help the company grow? For many employers, the answer is helping employees manage their student loan debt.
Over the years, student loan debt has reached an astronomical sum. As of 2008, college tuition fees rose by 439% from 1982. And by the first quarter of 2018, 44 million Americans owed a total of $1.5 trillion in student loan debt, exceeding both credit card debt and auto loan debt, according to the Federal Reserve. Not only is this an extreme amount of debt, but has also taken an enormous emotional toll, with more than half of college-educated adults (54%) surveyed by Laurel Road in 2018 feeling that they will never make enough money to reach their financial goals.
Fast forward to today, and borrowers are seeking creative ways to tackle their debt and save more. Recently, in a private ruling, the IRS granted Abbott Laboratories, a national healthcare company, the option to contribute to employee 401(k) plans based on the employee’s student loan payments. Other companies — from corporate behemoths to busy startups — have partnered with student loan refinancing companies to offer employees refinancing options that can help them save, often at no cost to the company.
With Americans quitting their jobs at the fastest rate since 2001, keeping employees happy is imperative. And part of keeping millennials happy is to provide practical benefits, not just the fun perks. Employees are looking to foster meaningful relationships with their employers — so looping in student loan repayment benefits can pay off for both the employer and the employee.
So what’s to gain? Here are some of the top reasons employers should consider incorporating student loan repayment benefits into their 2019 benefits package.
1. Recruit, retain and stand out
2. It’s flexible and free
3. Eliminate the student loan vs. retirement conflict
4. Help employees save
One of the reasons why the student loan benefit is attractive for employees is the significant savings it can lead to. If refinancing is an option, employees have the potential to save thousands of dollars over the life of their loan through a lower loan interest rate and lower monthly payments.
In the long run, the cumulative savings can add up to several thousand dollars or more. Employers should keep in mind that the savings amount will change depending on the financing company you choose to work with. Many can offer employer customers exclusive rates, which leads to even greater savings.
5. Boost morale and productivity
According to another benefits company, 31% of employees surveyed say their money concerns affect their work. Meanwhile, 74% of people feel stress daily about their student loan debt and spend time at work thinking about it, impacting their overall productivity in the workplace. So in addition to the hard savings employees are earning through these programs, they are also rewarded with the soft benefits of reduced stress and anxiety at work.
With student loan debt reaching record highs in recent years, employers have recognized that there’s a crucial need to provide employees with options to help them pay down their student loan debt. And when options like refinancing come at no cost to them, this benefit will likely become more popular. In the future, we can expect more employers to pave the way for student loan repayment programs. Will you be one of the trailblazers?
Unleash voluntary benefits to attract millennials
Does your company know how to recruit the younger generations? Employers can use voluntary benefits to help attract millennials. Continue reading to learn more.
A war for talent is being waged. Boomers are retiring and seeking new challenges and now is the time to woo the millennials. Just how do you attract the right millennials for your company? Like most organizations, you probably offer a total rewards package that includes competitive compensation and core benefits, like medical, dental, life, disability and a 401(k) plan.
See also: One sure-fire way to engage employees in voluntary benefits
What about those ancillary benefits you hear about in the marketplace? While a ping pong table in the break room may entice some, many millennials seek help for specific needs from their potential employer. Voluntary benefit products can be the missing puzzle piece in your total benefits package and can help younger candidates feel confident that your benefit plan is tailored to them.
Millennials want real choice, access and ease of use. In this Amazon Prime world we live in, it’s important that enrolling in benefits and paying for them are as easy as possible. Exceptional communications, smart enrollment options and ease of payment are key to success.
Here are some voluntary benefit options to consider:
Accident & hospital indemnity insurance programs
While critical illness insurance may not appeal to a millennial, certain worksite benefits are beneficial. These benefits help employees pay for unexpected out-of-pocket medical costs, as well as cover the financial gaps of traditional coverage like deductibles and coinsurance. Worksite benefits pay cash to the individual, allowing the participant the flexibility to use the funds however she or he sees fit — for rent, car payments, living expenses or out-of-pocket medical expenses. Accident Insurance generally pays a cash reimbursement based on an injury benefit schedule. So, if the employee has a bicycle or paddleboard accident and breaks a leg, cash payments will be made for the type of injury and treatment. A similar type of benefit is Hospital Indemnity Insurance that pays a lump sum for an initial hospital admission and then a per diem benefit. The best part is the cost of these benefits is relatively inexpensive — like paying for a few cappuccinos a month.
See also: 3 Ways to Reshape How You Communicate About Benefits with Millennials
Student loan refinancing programs
Millennials are feeling the brunt of their student loans. One in four millennials owe more than $30,000 in college debt and think that it will take more than 20 years to pay them off, according to an ORC International Survey. Student loan stress is making millennials feel less financially secure than their older work colleagues. This can have an adverse effect on any type of savings plans an employer offers such as a 401(k). More employers are considering programs that can help employees manage their student loan debt. There are typically three ways to look at these programs:
- Refinancing options: There are many lenders that work specifically with student debt and will refinance and consolidate existing student loans and may offer a special incentive if this is done through their employer. Keep in mind, if an employee has a federally-backed student loan, refinancing may not be the best solution.
- Debt management resources: Many lenders that provide refinancing options have educational tools and resources to assist employees in managing their debt.
- Employer contribution: Of course, this would not necessarily be a voluntary benefit-only program, but employers are looking into helping their employees pay their loans back through employer-sponsored match programs.
Employee purchase programs
Millennials’ student loans may prevent them from making certain necessary purchases. Employee Purchase Programs offered through employers can help workers pay for items they may need immediately, like a washer and dryer replacement over a period of time. Like other voluntary benefits, this one comes with the added convenience of payroll deduction and repayment, helping millennials feel more empowered to make these more expensive purchases and build their credit.
Auto & Homeowners Insurance and legal insurance
Group auto and homeowners’ insurance offered through an employer can provide discounts based on tenure and payroll deductions that are not available in the individual market. Group legal insurance may be attractive to millennials who need to create a will for the first time or buy a new house. Most services are covered and family members are also sometimes eligible to be part of the plan.
See also: 15 employee benefits on the rise
In a time when cost-saving initiatives may be pinching employer-sponsored health plans, voluntary benefits may help cover gaps left by high deductible plans and provide value to employees without adding cost to the bottom line. With diverse offers, easy enrollment, low premiums and payroll deductions, voluntary benefits are worth considering and should be an integral part of your attraction and retention program for millennials.
SOURCE: Marcia, P. (17 September 2018) "Unleash voluntary benefits to attract millennials" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/unleash-voluntary-benefits-to-attract-millennials
5 ways benefits educators can ease the open enrollment process
Are you prepared for open enrollment? HR professionals are responsible for effectively communicating plan options and changes to employees so they make informed decisions regarding their coverage and healthcare. Continue reading to learn more.
Open enrollment season is on its way, which means that HR’s already full plate just got a bit fuller. In addition to developing competitive health plans that attract and retain top talent – talent of all ages and with varying needs – HR pros are also responsible for effectively communicating plan options to employees to ensure that individuals make informed, cost-conscious decisions about their coverage and care.
See also: Here’s how HR pros can breeze through open enrollment
As the healthcare landscape becomes more complex, so do employee questions around their health care benefits. Many healthcare consumers today don’t feel comfortable navigating the health care system – which is why most roll over the same plan year after year. While HR teams want to manage the influx of employee questions around their benefits options, they struggle to provide the necessary guidance given their current bandwidth. Covering health plans in a large townhall meeting won’t provide the personalized information that employees need to make educated decisions. To deliver a more personal, empowering experience, organizations can look to benefits educators to supplement strapped HR teams.
Benefits educators can help individuals better understand the plan options available to them and select the package that offers the coverage they need at the price that best fits their budget. To ensure that benefits educators are aligned with the organization’s strategy, HR teams should arrange for educators well in advance of open enrollment so they are equipped to best explain the employer’s benefits plan options. Once up to speed, benefits educators can hold one-on-one conversations with employees to:
1. Define healthcare terms that employees don’t understand. With low healthcare literacy rampant across the U.S., disturbingly few employees are comfortable defining basic health terms such as “deductible,” “copay” or “coinsurance.” benefits educators cannot only explain these important terms but also help employees understand their significance in their coverage selection process.
2. Compare different plans to suit each employee’s needs. Benefits educators will work to understand the specific needs of each employee they meet. By taking the time to sit and get to know each employee, the benefits educator can recommend options that provide the coverage that best meets the needs of the employee and his or her family.
See also: Avoid these 12 Common Open Enrollment Mistakes
Third-party, independent benefits educators can be particularly valuable for employees who do not feel comfortable posing personal questions to their coworkers. By meeting one-on-one with an outsider who understands both benefits in general and company options in particular, employees are often more inclined to raise specific health or personal details that should guide their benefits selection. In fact, 45 percent of employees say they would prefer to speak to a benefits expert when choosing their coverage.
3. Equip employees with the information they need to choose their coverage. Left to their own devices, 83 percent of employees spend less than an hour reviewing their plan options before open enrollment – a lack of preparation that does not bode well for educated benefits selection. benefits educators can focus on the details that matter – saving the employee time and effort.
4. Explain voluntary benefits. Despite the increasing popularity of voluntary benefits, many employees are still confused about what they are, how they work and why they might be helpful. In reality, certain voluntary benefits can help control health costs and bridge the gap between medical coverage and out-of-pocket costs – added expenses that concern 61 percent of employees. In today’s multigenerational workforce – where employees have very different priorities when it comes to their health and financial wellness – benefits educators can dispel some of the mystery and suggest options that might meet individual needs.
5. Empower employees to make the most of their benefits year-round. Benefits educators can lay the groundwork for more educated health care consumers by directing employees to resources where they can find more information about their coverage and how their plans work after the open enrollment ends.
See also: 5 tips to make this the best open enrollment ever
More informed employees not only make smarter choices about their coverage and care but also better appreciate their employers – which has the potential to help with retention and business productivity. Ultimately, organizations see a win-win-win: happier employees who save on care, happier HR teams who save on time and happier executives, who see a significant return on their health care investments.
SOURCE: Murdock, G (21 September 2018) "5 ways benefits educators can ease the open enrollment process" (Web Blog Post). Retrieved from https://www.benefitspro.com/2018/09/21/5-ways-benefits-educators-can-ease-the-open-enroll/
How employers can support employees during cancer treatment
Many people with cancer are choosing to continue working during their treatment. Read this blog post to learn how employers can support their employees during their cancer treatment.
Thanks to more sensitive diagnostic testing, earlier diagnosis and new treatments, the number of cancer survivors in the U.S. has grown to 15.5 million, and that number is projected to increase to 20.3 million by 2026. In addition, about 1.7 million Americans are projected to be diagnosed with cancer this year. A large percentage of these cancer patients and survivors are still active members of the workforce and the numbers have the potential to increase even more as people remain in the workforce beyond age 65.
Some people with cancer choose to continue working during treatment. Reasons for continuing to work can be psychological as well as financial. For some, their job or career is a big part of the foundation of their identity. A survey conducted by the non-profit Cancer and Careers found that 48% of those surveyed said they continued to work during treatment because they wanted to keep their lives as normal as possible, and 38% said they worked so that they felt productive. Being in the workforce also provides a connection to a supportive social system for many people and boosts their self-esteem and quality of life.
See also:
There also are financial benefits to the employer when employees continue to work during cancer treatment. Turnover costs, including hiring temporary employees and training replacement employees, are high. The cost of turnover for employees who earn $50,000 per year or less (which is approximately 75% of U.S. workers) average 20% of salary. For senior and executive level employees, that cost can reach 213% of salary. In addition, it can be costly to lose the experience, expertise, contacts and customer relationships employees have built.
This raises the question for employers: How can I support employees who choose to work while undergoing cancer treatment? Providing that support can be complex as employers work to balance their legal responsibilities under the Americans with Disabilities and Family and Medical Leave Acts with the privacy requirements of the Health Insurance Portability and Accountability Act (HIPAA).
When an employee chooses to share his or her diagnosis with a supervisor or HR representative, employers should view this disclosure as the beginning of a conversation with the employee taking the lead. (It’s up to the employee what information he or she wants to disclose about the diagnosis and treatment and with whom the information can be shared within the organization.) Here are four ways employers can support employees who are getting cancer treatment.
Help employees understand what benefits are available
The first step an employer should take is to refer the employee to the organization’s human resources manager (or someone who handles HR matters if the organization is smaller and does not have a human resources department) so that person can share information about all available benefits and pertinent policies. Provide details on:
- Medical and prescription drug coverages, including deductibles, co-pays, precertification requirements, network healthcare providers and plan and lifetime maximums
- Leave policies
- Flexible scheduling and remote work options, if available
- Employee assistance programs
- Community resources and support groups
See also:
Offer professional guidance
Offering patient navigator or case management services can also be beneficial. Navigators and case managers can provide a range of services including:
- Connecting employees with healthcare providers
- Arranging second opinions
- Providing evidence-based information on the type of cancer the employee has been diagnosed with and options for treatments
- Help filing health insurance claims, reviewing medical bills and handling medical paperwork
- Coordinating communication and medical records among members of the treatment team
- Attending appointments with employees
- Answering employee questions about treatments and managing side effects
Make accommodations
Workplace accommodations are another key pillar of support for employees working during cancer treatment. In addition to flexible scheduling, to accommodate medical appointments and help employees manage side effects like fatigue and nausea, and the option of working from home, workplace accommodations can include:
- Temporary assignment to a less physically taxing job
- Substituting video conferencing or online meetings for travel, which can be difficult for employees dealing with fatigue or a suppressed immune system, and can make it hard to attend needed medical appointments
- Leave sharing for employees who have used all their paid time off and can’t afford to take unpaid leave. Some organizations offer leave banks or pools where employees can “deposit” or donate some of their vacation days for employees dealing with a serious illness to use.
See also:
Employees may continue to need accommodations after treatment ends if they face late side effects such as fatigue, difficulty concentrating, numbness caused by nerve damage or heart or lung problems. Continuing job and schedule modifications can help mitigate the situation.
Ask for employee input
An often overlooked part of supporting employees who are working during cancer treatment is asking the employee what types of support he or she needs and prefers. Employees can share any medical restrictions related to their condition, what types of accommodations or equipment will help them do their job, and what schedule changes will allow them to attend needed appointments and recover from treatment. This should be an ongoing conversation because the employee’s needs are likely to change over the course of treatment and recovery.
SOURCE: Varn, M. (21 September 2018) "How employers can support employees during cancer treatment" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/how-employers-can-support-employees-during-cancer-treatment?brief=00000152-14a5-d1cc-a5fa-7cff48fe0001
Stop making 401(k) contributions. Fill up your HSA first
Open enrollment season is nearing, and soon, employees will be able to decide how much they want to contribute to their health savings accounts (HSA) next year. Read this blog post to learn why employees should contribute to their HSA before their 401(k).
With healthcare open enrollment season approaching, employees electing a high-deductible health plan will soon have an opportunity to decide how much to contribute to their health savings account for next year.
My advice?
Contribute as much as you possibly can. And prioritize your HSA contributions ahead of your 401(k) contributions. I believe that employees eligible to contribute to an HSA should max out their HSA contributions each year. Here’s why.
See also: What’s the best combination of spending/saving with an HSA?
HSAs are triple tax-free. HSA payroll contributions are made pre-tax. When balances are used to pay qualified healthcare expenses, the money comes out of HSA accounts tax-free. Earnings on HSA balances also accumulate tax-free. There are no other employee benefits that work this way.
HSA payroll contributions are truly tax-free. Unlike pre-tax 401(k) contributions, HSA contributions made from payroll deductions are truly pre-tax in that Medicare and Social Security taxes are not withheld. Both 401(k) pre-tax payroll contributions and HSA payroll contributions are made without deductions for state and federal taxes.
No use it or lose it. You may confuse HSAs with flexible spending accounts, where balances not used during a particular year are forfeited. With HSAs, unused balances carry over to the next year. And so on, forever. Well at least until you pass away. HSA balances are never forfeited due to lack of use.
Paying retiree healthcare expenses. Anyone fortunate enough to accumulate an HSA balance that is carried over into retirement may use it to pay for many routine and non-routine healthcare expenses.
See also: 3 things you should be telling employees about HSAs
HSA balances can be used to pay for Medicare premiums, long-term care insurance premiums, COBRA premiums, prescription drugs, dental expenses and, of course, any co-pays, deductibles or co-insurance amounts for you or your spouse. HSA accounts are a tax-efficient way of paying for healthcare expenses in retirement, especially if the alternative is taking a taxable 401(k) or IRA distribution.
No age 70 1/2 minimum distribution requirements. There are no requirements to take minimum distributions at age 70.5 from HSA accounts as there are on 401(k) and IRA accounts. Any unused balance at your death can be passed on to your spouse (make sure you have completed a beneficiary designation so the account avoids probate). After your death, your spouse can enjoy the same tax-free use of your account. (Non-spouse beneficiaries lose all tax-free benefits of HSAs).
Contribution limits. Maximum annual HSA contribution limits (employer plus employee) for 2019 are modest — $3,500 per individual and $7,000 for a family. An additional $1,000 in catch-up contributions is permitted for those age 55 and older. Legislation has been proposed to increase the amount of allowable contributions and make usage more flexible. Hopefully, it will pass.
HSAs and retirement planning. Most individuals will likely benefit from the following contribution strategy incorporating HSA and 401(k) accounts:
- Determine and make the maximum contributions to your HSA account via payroll deduction. The maximum annual contributions are outlined above.
- Calculate the percentage that allows you to receive the maximum company match in your 401(k) plan. Make sure you contribute at least that percentage each year. There is no better investment anyone can make than receiving free money. You may be surprised that I am prioritizing HSA contributions ahead of employee 401(k) contributions that generate a match. There are good reasons. Besides being triple tax-free and not being subject to age 70 1/2 required minimum distributions, these account balances will likely be used every year. Unfortunately, you may die before using any of your retirement savings. However, someone in your family is likely to have healthcare expenses each year.
- If the ability to contribute still exists, then calculate what it would take to max out your contributions to your 401(k) plan by making either the maximum percentage contribution or reaching the annual limit.
- Finally, if you are still able to contribute and are eligible, consider contributing to a Roth IRA. Roth IRAs have no age 70 1/2 minimum distribution requirements (unlike pre-tax IRAs and 401(k) accounts). In addition, account balances may be withdrawn tax-free if certain conditions are met.
The contributions outlined above do not have to be made sequentially. In fact, it would be easiest and best to make all contributions on a continuous, simultaneous, regular basis throughout the year. Calculate each contribution percentage separately and then determine what you can commit to for the year.
See also: Change to 2018 HSA Family Contribution Limit
Investing in HSA contributions is important. The keys to building an HSA balance that carries over into retirement include maxing out HSA contributions each year and investing unused contributions so account balances can grow. If your HSAs don’t offer investment funds, talk to your human resources department about adding them.
HSAs will continue to become a more important source of funds for retirees to pay healthcare expenses as the use of HDHPs becomes more prevalent. Make sure you maximize your use of these accounts every year.
SOURCE: Lawton, R. (19 September 2018) "Stop making 401(k) contributions. Fill up your HSA first" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/viewsstop-making-401k-contributions-fill-up-your-hsa-first
Oct. 15 Deadline Nears for Medicare Part D Coverage Notices
Are you prepared for the Medicare Part D coverage notice deadline? Plan sponsors that offer prescription drug coverage must provide notices to Medicare-eligible individuals before October 15. Read on to learn more.
Plan sponsors that offer prescription drug coverage must provide notices of "creditable" or "non-creditable" coverage to Medicare-eligible individuals before each year's Medicare Part D annual enrollment period by Oct. 15.
Prescription drug coverage is creditable when it is at least actuarially equivalent to Medicare's standard Part D coverage and non-creditable when it does not provide, on average, as much coverage as Medicare's standard Part D plan.
The notice obligation is not limited to retirees and their dependents covered by the employers' plan, but also includes Medicare-eligible active employees and their dependents and Medicare-eligible COBRA participants and their dependents.
Background
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires group health plan sponsors that provide prescription drug coverage to disclose annually to individuals eligible for Medicare Part D whether the plan's coverage is creditable or non-creditable.
The Centers for Medicare & Medicaid Services (CMS) has provided a Creditable Coverage Simplified Determination method that plan sponsors can use to determine if a plan provides creditable coverage.
Disclosure of whether their prescription drug coverage is creditable allows individuals to make informed decisions about whether to remain in their current prescription drug plan or enroll in Medicare Part D during the Part D annual enrollment period.
Individuals who do not enroll in Medicare Part D during their initial enrollment period, and who subsequently go at least 63 consecutive days without creditable coverage (e.g., because they dropped their creditable coverage or have non-creditable coverage) generally will pay higher premiums if they enroll in a Medicare drug plan at a later date.
Who Must Receive the Notice?
The notice must be provided to all Medicare-eligible individuals who are covered under, or eligible for, the sponsor's prescription drug plan, regardless of whether the plan pays primary or secondary to Medicare. Thus, the notice obligation is not limited to retirees and their dependents but also includes Medicare-eligible active employees and their dependents and Medicare-eligible COBRA participants and their dependents.
Notice Requirements
The Medicare Part D annual enrollment period runs from Oct. 15 to Dec. 7. Each year, before the enrollment period begins (i.e., by Oct. 14), plan sponsors must notify Medicare-eligible individuals whether their prescription drug coverage is creditable or non-creditable. The Oct. 15 deadline applies to insured and self-funded plans, regardless of plan size, employer size or grandfathered status.
Part D eligible individuals must be given notices of the creditable or non-creditable status of their prescription drug coverage:
- Before an individual's initial enrollment period for Part D.
- Before the effective date of coverage for any Medicare-eligible individual who joins an employer plan.
- Whenever prescription drug coverage ends or creditable coverage status changes.
- Upon the individual's request.
According to CMS, the requirement to provide the notice prior to an individual's initial enrollment period will also be satisfied as long as the notice is provided to all plan participants each year before the beginning of the Medicare Part D annual enrollment period.
| An EGWP exception
Employers that provide prescription drug coverage through a Medicare Part D Employer Group Waiver Plan (EGWP) are not required to provide the creditable coverage notice to individuals eligible for the EGWP. |
The required notices may be provided in annual enrollment materials, separate mailings or electronically. Whether plan sponsors use the CMS model notices or other notices that meet prescribed standards, they must provide the required disclosures no later than Oct. 14, 2017.
Model notices that can be used to satisfy creditable/non-creditable coverage disclosure requirements are available in both English and Spanish on the CMS website.
Plan sponsors that choose not to use the model disclosure notices must provide notices that meet prescribed content standards. Notices of creditable/non-creditable coverage may be included in annual enrollment materials, sent in separate mailings or delivered electronically.
| What if no prescription drug coverage is offered?
Because the notice informs individuals whether their prescription drug coverage is creditable or non-creditable, no notice is required when prescription drug coverage is not offered. |
Plan sponsors may provide electronic notice to plan participants who have regular work-related computer access to the sponsor's electronic information system. However, plan sponsors that use this disclosure method must inform participants that they are responsible for providing notices to any Medicare-eligible dependents covered under the group health plan.
Electronic notice may also be provided to employees who do not have regular work-related computer access to the plan sponsor's electronic information system and to retirees or COBRA qualified beneficiaries, but only with a valid email address and their prior consent. Before individuals can effectively consent, they must be informed of the right to receive a paper copy, how to withdraw consent, how to update address information, and any hardware/software requirements to access and save the disclosure. In addition to emailing the notice to the individual, the sponsor must also post the notice (if not personalized) on its website.
| Don't forget the disclosure to CMS
Plan sponsors that provide prescription drug coverage to Medicare-eligible individuals must also disclose to CMS annually whether the coverage is creditable or non-creditable. This disclosure must be made no more than 60 days after the beginning of each plan year—generally, by March 1. The CMS disclosure obligation applies to all plan sponsors that provide prescription drug coverage, even those that do not offer prescription drug coverage to retirees. |
SOURCE: Chan, K.; Stover, R. (10 September 2018) "Oct. 15 Deadline Nears for Medicare Part D Coverage Notices" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/medicare-d-notice-deadline.aspx/
Here’s how HR pros can breeze through open enrollment
Does open enrollment make your HR department tremble with fear? Open enrollment season is right around the corner and can make the most experienced HR professionals shudder. Read on to learn how your HR department can breeze through open enrollment this year.
Three words have the power to make the most experienced HR professional shudder: open enrollment season.
Open enrollment season is a challenge, no matter how well the HR department prepares. Costs for medical and pharmacy benefits continue to rise, which means there are adjusted employee contributions to present to an audience who’s unlikely to understand the reasoning behind cost increases. There may be new benefits offerings that require employees to pay close attention during the decision-making process. There are open enrollment education campaigns and communications meetings to plan and launch.
Employers with multiple generations of workers must accommodate a wide range of health and welfare benefit needs. New laws (like the federal tax law) plus evolving regulations around benefits add more to HR’s already full plate. (No wonder you don’t have time for lunch.)
But, there’s good news. First, open enrollment is made easier if you plan throughout the year for it. Second, these four tips can help HR professionals make open enrollment much easier.
Review trends and projections ASAP. Focus on the renewal rate long before the renewal date. If your employee benefits renew at the beginning of the year, you may not have received your rate yet. But frankly, by now you should have a very good idea where the rate is projected to land. Reviewing claims and trend data alongside benchmarking and industry analyses throughout the year can help you and your broker project, within a few percentage points, how your renewal rate will increase or decrease.
Your benefits broker should be analyzing your program data on an ongoing basis to estimate the renewal rate and avoid a nasty surprise. The broker should also challenge the first carrier rate offered — there’s almost always room for negotiation. Doing pre-renewal work throughout the year can help you prepare for plan changes and position you to make the best decisions for the organization and employees. It will also help facilitate a smoother open enrollment season.
Keep new benefit options simple. After reviewing benefits and trends, you may find that adding a pre-tax benefit, such as a health savings account, flexible spending account or a health reimbursement account, can help the organization save money while giving employees a way to better plan their healthcare and finances. However, with their alphabet soup acronyms, HSAs, FSAs and HRAs are confusing. Even if you did a whole campaign on the topic for the last open enrollment season, it makes sense to repeat it.
The same goes for voluntary benefits: keep them simple. There is a dearth of voluntary benefits available for a multi-generational workforce. While adding voluntary benefit sounds appealing —especially if your core benefits are changing — which products are right for your organization? Survey your employees to get their feedback; they’ll appreciate that you’re asking for their opinion. Once you tally the feedback, resist the urge to offer a slew of voluntary products. Keeping it simple means adding the one (or a few) that are most desired by your workforce.
Voluntary benefits require significant education and engagement — especially products that are newer to the market. (Student loan debt assistance is a good example.) When it comes to a successful voluntary benefits program, timing is everything. If you plan to add student loan debt repayment, pet insurance, long-term care, or any other new voluntary product, the open enrollment season is not the recommended time to do it. Running a voluntary education and communications campaign and open enrollment off cycle will allow employees to focus on their main menu of options during the open enrollment season, then decide later what they want to add for “dessert.”
Educate. Rinse and repeat. You offer employee benefits to help recruit and retain the best talent. But if your employees don’t understand the core and voluntary benefits you offer, you’re unlikely to increase engagement or retention — and you might even see costs rise.
The health and welfare benefits landscape is changing drastically, which means the onus is on the employer and the HR department to educate the workforce on how the plan is changing (if at all). This means putting decision-support tools, such as calculators, in employees’ hands to help them estimate how much insurance they will need to make the best decision. You could run a whole campaign around that topic.
In addition, try using new methods of communication such as social media messages, text messaging, small-group meetings, your company’s intranet, and one-on-one sessions to help employees avoid mistakes at decision time.
Create a 21st-century experience. Manual benefits enrollment and tracking is so 1999. Moving away from paper-based enrollment will save trees — and possibly your sanity — during the open enrollment season and throughout the year. Benefits administration technology allows employees to ponder their options and enroll at their leisure. A decision-support platform enables better enrollment tracking and eliminates typos and mistakes that can pose major issues for the plan participant and the HR team.
Benefits administration technology provides checks and balances that streamline important tactical functions. Mistakes can put you in a world of hurt when it comes to benefit laws and regulations, such as missing those all-important annual HIPAA and COBRA notifications. You can avoid potential government penalties, fines and employee lawsuits with automatic notifications by the benefits administration platform. Technology can also help you identify ineligible dependents, provide employee data to a COBRA provider if employment ends, interface with your payroll platform — the list is almost endless.
The bottom line: Employees won’t enroll in what they don’t understand — which could lead them to choose a benefits plan that is more expensive, or with fewer options, than what they need. Being prepared for open enrollment season, keeping plans simple, focusing on employee education and communications (and the employee experience) can help mitigate issues for plan participants and HR.
Putting all of your ducks in a row throughout the year will ease headaches during the open enrollment season. You might even be able to take a lunch break.
SOURCE: Newman, H (30 August 2018) "Here’s how HR pros can breeze through open enrollment" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/how-human-resources-can-breeze-through-open-enrollment?feed=00000152-a2fb-d118-ab57-b3ff6e310000
5 critical conversations to have before retiring
According to the Society of Actuaries' Retirement Section and Committee on Post Retirement Needs and Risks, about 70 percent of Americans are on course to maintain their standard of living in retirement. Are your employees ready for retirement? Continue reading to learn more.
Reports of Americans’ lack of retirement preparedness roll on. Not all the news is grim, however. A recent study from the Society of Actuaries’ Retirement Section and Committee on Post Retirement Needs and Risks reports that roughly 70% of Americans are on course to maintain their pre-retirement standard of living.
What we know from those who report being comfortable in retirement is that they took the steps necessary to properly prepare.
It’s not just what employees and clients have earned and saved that contributes to their quality of life in retirement, it’s also how they approach their assets, expenses, and income. To this end, individuals must speak frankly with those in their lives — partner or spouse, employer, children — who are pivotal to key aspects of retirement living.
Here are the five critical conversations individuals should have well in advance of retirement:
With your spouse or partner
1. Are we on the same page about the lifestyle we expect to have in retirement?
Before you retire, you and your partner need to get on the same page about what this means in day-to-day terms. For example, did you know that your living expenses in retirement will likely be about 80% of your pre-retirement living expenses? This means that your monthly budget will change and it’s important to make the changes thoughtfully. Examine your priorities and assumptions together to avoid misunderstandings that lead to financial missteps.
Do yourselves a favor and take a gradual approach to downsizing your spending well before retirement. This will let you significantly cut your monthly expenses without feeling the shock of adjustment. Take a close look at your monthly expenses together and identify items you can do without. Then, start eliminating a few at a time.
2. Are there parts of our life we should “downsize” before we retire?
Downsizing your home can be a real savings opportunity in retirement. Relocating to a city with a lower cost of living can also cut your monthly expenses considerably. You can even downsize your car, or go car-free altogether. These are big changes, however, that you and your partner need to consider very carefully together. You’ll want to weigh the possible savings against other important but not necessarily financial factors, such as proximity to friends and family and access to good recreational and medical facilities. Take your time weighing the pros and cons. If you can agree on which tradeoffs you are both willing to make, the impact on your security and comfort in retirement can be huge.
3. Are we really ready to retire? If not, what do we need to do to get there?
Compare your “retirement number” to your anticipated monthly expenses. Identify discrepancies so you can make adjustments and plans as needed.
Do we need to delay retirement by a few years? Even one or two extra years of work, during your peak earning years, may have a significant effect on your quality of life in retirement. Consider this question carefully as you plan when to leave work.
What other sources of income will be available to us in retirement? There are many paths to a comfortable retirement and many different ways to patch together the right assets and investments to provide for your retirement. Even if your investment portfolio is not large enough to support your retirement needs, for example, you may find that you have other assets (a business, or real estate) that can contribute. Or one or both of you may choose to work part time — the “sharing economy” is a good place to start. Or, you may decide to sell off assets you no longer need.
With your employer
4. Should I transition to a freelance/consulting relationship?
Even if you’re looking forward to stepping away from your professional career, the smart move may be to maintain a freelance or consulting relationship with your current employer. Chances are, you have experience and skills that will continue to be valuable to your employer, even when you are no longer on staff full-time. A dependable source of extra income will help you cover unexpected expenses in retirement. Or, you can use the extra income to pay for more of the things you always dreamed of doing in retirement, like hobbies and travel.
Before you have the conversation with your boss, research what a fair fee rate is for someone at your experience level, in your industry. This will allow you to negotiate your future contract from a position of strength. Your track record as a reliable employee and the cost savings to your employer of no longer having you as full time staff should also boost the argument in your favor.
With your adult children
5. How will our lifestyle changes in retirement affect the rest of the family?
Changes in your lifestyle in retirement may affect your extended family in various ways. Setting realistic expectations up front may help ease any necessary adjustments.
For example, are your adult children accustomed to receiving financial assistance from you? Let them know that this may no longer be possible after you retire and have less disposable income.
Downsizing your house? If you have been the default host for family holiday celebrations, downsizing to a smaller home may require the family to rethink future holiday arrangements. Don’t wait until the holidays are upon you to spring the change on them: discussing it ahead of time will ensure that everyone’s best ideas are considered and good alternate plans made.
Planning to relocate, or travel frequently after you retire? You will likely no longer be available for babysitting or many other family activities. Giving your kids and grandkids plenty of notice will help them plan ahead.
These conversations may be awkward and possibly painful, but they need to take place. After saving for years, a clear eye will help with your post-work years.
SOURCE: Dearing, C (12 September 2018) "5 critical conversations to have before retiring" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/critical-conversations-to-have-before-retiring
Identity theft protection benefits and the business case for employers
Employees are turning to their employers for identity theft protection benefits with the rise in identity theft news. Continue reading to learn more.
With identity theft in the news constantly, many employees are turning to their employers to ask for an identity protection benefit.
Let us focus on productivity and wellness. Identity theft can wreak havoc on an employee’s personal and work life. According to SANS Institute, it takes an average of six months and up to 200 hours of personal time to resolve issues related to the theft. This includes hours calling banks, credit card companies, filing police reports, notifying the Social Security Administration, and alerting credit bureaus. Most of these calls and follow up activity must be made during business hours. According to ITRC’s latest study, 22% of respondents took time off of work when dealing with issues of identity theft.
Identity theft also impacts wellness and mental health. According to the ITRC study, 75% of respondents reported that they were severely distressed by the misuse of their information, and many sought professional help to manage their identity theft experience — either by going to a doctor for their physical symptoms or seeking mental health counseling.
These findings make it clear that identity theft directly impacts productivity and wellness. That is why comprehensive and compassionate restoration services should be a key element of any ID Protection plan offered by the employer.
Restoration services are the fixers in a comprehensive identity protection plan. For victims of identity theft, the restoration specialist will do the required work to restore the victim’s identity. Specialists make the calls during business hours, complete the necessary paperwork, and manage the process. They free up the employee to focus on their job, and alleviate the stress of dealing with the challenges of identity restoration.
There are a range of features to look for when evaluating restoration services across plans. Some plans only offer advice and information kits to guide members on what steps they need to take. Those services typically do not do the work for the member.
For plans that provide a full restoration process, consider if the plan provides victims with a dedicated restoration specialist as a single point of contact. Since the restoration process can take months or years, it’s best if a victim has a consistent person to speak with who knows the case and can provide periodic updates. Restoration services should be available 24/7 so victims can initiate the process immediately to lessen the damage. Plans should also provide multilingual specialists to best serve all members and handle all types of identity theft.
Although monitoring may alert individuals that are a victim of identity theft, the even greater value is in fixing the situation. Be sure to fully evaluate the restoration features of an identity protection plan as part of the selection process.
SOURCE: Hazan, J (31 August 2018) "Identity theft protection benefits and the business case for employers" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/identity-theft-protection-benefits-and-the-business-case-for-employers