Fiduciary Rollout: DOL to Extend a Hand
Original post employeebenefitadvisor.com
WASHINGTON -- As the dust begins to settle after the Department of Labor issued its hotly contested fiduciary regulation, one of the key officials who led the rulemaking initiative says that he anticipates issuing clarifying guidance on an ongoing basis as industry feedback trickles back on how the rules are working in practice.
“This is a major undertaking and that we need to be mindful of what impact it's having as people are implementing it,” said Timothy Hauser, a deputy assistant secretary at the Labor Department, on Tuesday at a policy forum hosted by the Investment Company Institute. “We need to have the courage to make changes and to be responsive as problems emerge. And I can assure you we have every intent of doing so."
The ICI is a trade group that has been sharply critical of the rulemaking process.
Rule opponents have argued that many firms would be more likely to abandon middle-income clients planning for retirement, rather than submit to the contractual provisions relating to best-interest advice. But Hauser noted that the department made changes as it redrafted the final rule, in a bid to make the provisions less burdensome.
FURTHER TWEAKS TO RULE
Hauser took pains to explain that that process is still ongoing, insisting that he will entertain further tweaks to the rule and will publish clarifying guidance, likely in a question-and-answer format on a "rolling basis."
"We did our level best, really, to try to find the legitimate concerns and objections people had to what we were doing and try to be responsive," Hauser said. "We'll continue to do that as we move forward."
At the same time, Hauser offered a strong defense of the rule and the underlying rationale for the department's effort to crack down on conflicted advice in the retirement sector.
"The basic idea, first and foremost, is that we want advice to be in the customer's interest rather than in the interest of the adviser," he said. "The basis for this project — the reason we undertook this in the first place — was our belief that there was a significant problem in this marketplace."
The department's solution: update its rules under the 1974 Employee Retirement Income Security Act to extend fiduciary obligations to financial professionals working with retirement savers and plans, a threshold that is generally met when an adviser makes an investment recommendation and in turn receives compensation, Hauser said.
Hauser acknowledged that the ERISA statute has a "strong default position against conflicts of interest," but pointed out that the new rule explicitly permits conflicts such as commissions and proprietary products, provided that advisers offer up-front disclosures and aver in a binding contract that they will act in their clients' best interests.
That so-called best interest contract exemption has been one of the chief complaints of industry critics. But Hauser was quick to remind his audience that the rule will have minimal impact on advisers who offer advice that is free of conflicts.
"[T]there's nothing in the natural order of things that requires people to receive conflicted compensation streams as a condition of giving advice," he said. "However, we also don't outlaw conflicted compensation streams. The firm can continue to get commissions, it can get 12b-1 fees, it can get revenue sharing, it can get the variety of third-party payments."
Hauser continued: "But there's a quid pro quo for that. There's a basic deal that you need to strike with your customer, by and large, if you want to do that, and the deal is simple. You have to make a commitment to the customer that you're going to act in their best interest, and it needs to be enforceable."
NOT FOR PUNITIVE ENFORCEMENT
Hauser also said the DoL is not looking at the rule as a vehicle for a punitive enforcement policy. Instead, he said that the department is hoping to serve as a resource for affected firms and to work with them in a collaborative spirit as they implement the new rules.
"Our primary efforts are not going to be about finding people to sue, it's going to be about helping people to comply," he said. "Any problems you're wrestling with, issues you're trying to deal with, operational issues you're confronting — we'd love to hear from you, we'd love to be able to give advice. I would much rather get advice out early rather than have you build entire systems only to have us say, 'Nah, we don't think that complies.' I think it's in all our interest to make this work."
Employers' Greatest Fears: PPACA & Compliance
Original post benefitspro.com
The last few years have put employers in the position of becoming compliance officers. The Department of Labor, Health and Human Services, and the Internal Revenue Service have actively been pursuing small- and mid-size businesses about various issues, from PPACA reporting to wage and hour miscalculations.
It is becoming a full-time job for manager HR representatives to keep up with the requirements of a compliant business.
The average employer cannot tell you what the affordability test is compared to the value test, but they know that it is now a requirement. Most important is the employer's concern for their employees to have the best health insurance available for the least expensive price. The employees are now looking for jobs that will provide them with health insurance in order to not be penalized at tax filing time. Employers are trying to understand what exactly they should be providing under health care reform in order to not pay additional fines for doing it incorrectly.
IRS fines are increasing in 2016 for employees to either $695 or 2.5 percent of adjusted family income per uninsured adult, whichever is greater. Employers will have to pay $2,160 per employee (after the first 30) if not providing health insurance or for an incorrect plan, and $3,240 for each employee getting a subsidy through the marketplace. Penalties for not filing certain documents in time, such as form 5500 or form 1094C, can add up to $1,100 per late day.
Insurance agents are becoming consultants in a very different world than we first began. Employers are asking accounting and legal questions which are requiring research and partnerships with other professionals.
Employers want to know the difference now in using a professional employer organization (PEO) versus outsourcing their HR and payroll departments. If the employer decides to do it themselves, questions they ask are:
- How long do I keep the necessary paperwork?
- Should I use the qualifying offer method or the 98 percent offer method?
- Which Safe Harbor would be best for my situation?
Insurance consultants will be the ones answering these questions with their employers as well as reviewing the documents and procedures.
Education and wisdom are the most important values for an insurance consultant’s job security. Just about the time you learn it, it will change.
How Agents Can Help Comply with PPACA
Original post benefitspro.com
“You can help your employer clients comply with the Patient Protection and Affordable Care Act [PPACA] by becoming their trusted advisors,” Julie L. Hulsey, CLU, LUTCF, president and CEO, Zynia Business Solutions, Amarillo, Texas, told her audience in her presentation, “Employers’ Greatest Fears: PPACA and Compliance.”
As of Jan. 1, 2016, Hulsey reminded the audience, employers of 50 or more full-time equivalent (FTE) employees are required to provide health insurance to at least 95% of their employees or face a penalty. One key issue for employers is that many federal government entities are auditing small businesses with little to no coordination, for example:
1. Department of Labor, including the Wage and Hour Division, the Equal Employment Opportunity Commission and the Occupational Safety and Health Administration
2. Internal Revenue Service
3. Office for Civil Rights
4. Immigration Customs Enforcement
5. Department of Transportation
“Smaller employers, those with less than 50 employees, or 50 to 100 employees, don’t have an HR department or even an HR professional on staff,” Hulsey observed. One way agents and brokers can demonstrate their value is by providing clients with charts showing affordable coverage employee wage calculations for a 40-hour work week and for a 30-hour work week, she explained, showing the charts she had created for her clients.
Penalties 101 for agents and brokers
Hulsey reminded the audience that for 2016 the employer shared responsibility penalty of $2,000 is now $2,160, and the $3,000 penalty is now $3,240. If an employer is considering paying the penalty instead of offering insurance, you can point out that the penalty is not a tax deductible business expense but health insurance premiums are, which may affect the employer’s decision.
“Penalties will be calculated on a monthly basis so if you are out of compliance for just one month, you will only be penalized for that month,” Hulsey pointed out. “Therefore, become compliant as soon as possible to avoid accumulating more monthly penalties.”
If an employer offers a “minimum essential coverage” plan that meets the “affordable” and “minimum value” tests to an employee who declines it, no employer penalty will be owed for that employee. “Tell the employer to keep a copy of the signed waiver of coverage form, and get a signed waiver every year!” Hulsey said.
It’s important to let our clients know what the Department of Labor and the Department of Justice are targeting, Hulsey said. Quoting from a recent presentation by the DOL and DOJ that she attended, Hulsey said that the DOL’s FY 2013 Strategic Plan has a goal to generate $1,172,108,000 in enforcement results through 4,330 reporting compliance reviews. They indicated their enforcement program will use a series of approaches (including national/regional priorities, civil/criminal litigation, and sample Investigation Programs) to achieve this goal. The current strategic plan is under review and that enforcement goal is likely to increase.
Hulsey acknowledged that agents and brokers are losing commissions but you can take some action to limit those losses “Connect with professionals like TPAs and payroll vendors to offer some of those third party services,” she suggested. “Also, be sure you understand your clients’ needs so you can answer their questions.” Employers need answers about PPACA and compliance, and they’ll be calling you or their attorneys. “It’s better if they call you,” she said.
Counting Employees Doesn't Always Add Up
Original post benefitspro.com
Employee counts are used to determine what laws, rules, fees and penalties apply to a health plan and/or the employer sponsor. But the methods for counting employees are as varied as the laws that affect them. This creates confusion and frustration among employers and can significantly hinder their compliance efforts. To make sense out of all this, we have put together a synopsis of 12 counting methods that employers must utilize to properly administer their health plans. Read on to find out how to stay compliant as you move forward.
Employers with at least 15 employees
Law or compliance requirement applied:
Title VII of the Civil Rights Act, as amended by the Pregnancy Discrimination Act (PDA): Employers may not consider a person's race, color, sex (including sexual orientation), national origin, religion, or pregnancy in determining eligibility for, amount of, or charges for employee benefits. Denying coverage for a condition or treatment that disproportionately affects members of a protected group is also considered a violation of Title VII.
Americans with Disabilities Act (ADA): An employer may not deny an individual with a disability equal access to insurance, or require such an individual to have terms and conditions of insurance different than those of employees without disabilities. The ADA also applies to wellness and disease management programs.
Who to count: Employees working 20 or more calendar weeks in the current or preceding calendar year.
How to count: Count each full-time and part-time employee as one.
Consequences of noncompliance: The EEOC may bring an action in court, and individuals may file private lawsuits to correct violations and obtain appropriate legal or equitable relief (including attorney’s fees and other costs).
Employers with at least 20 employees
Law or compliance requriement applied:
Genetic Information Nondisclosure Act (GINA): Group health plans may not discriminate against individuals based on genetic information and may not use this information in underwriting or determining premiums or contributions. It also restricts questions that can be asked on a Health Risk Assessment (HRA) if an incentive is offered for its completion.
Age Discrimination in Employment Act (ADEA): Benefits provided to older workers (40 years and older) must be the same as those provided to younger workers in all respects, including payment options, types of benefits and amount of benefits (although certain exceptions may apply).
Who to count: Employees working 20 or more calendar weeks in the current or preceding calendar year.
How to count: Count each full-time and part-time employee as one.
Consequences of noncompliance: The DOL may assess special penalties and the EEOC may bring an action in court against a plan sponsor for violations. Individuals may file private lawsuits to correct violations and obtain appropriate legal or equitable relief (including attorney’s fees and other costs).
Employers with at least 20 employees
Law or compliance requriement applied:
COBRA: COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates.
Who to count: Employees (in all commonly-owned businesses) on more than 50 percent of the typical business days in the previous calendar year.
How to count: Count each full-time employee as one. Each part-time employee counts as a fraction, with the numerator equal to the number of hours worked by that employee and the denominator equal to the number of hours that must be worked on a typical business day in order to be considered full-time.
Consequences of noncompliance: COBRA compliance failures can result in excise taxes and statutory penalties. Qualified beneficiaries may also file private lawsuits to correct violations and obtain appropriate legal or equitable relief (including attorney’s fees and other costs).
Employers with 20 or more employees
Law or compliance requriement applied:
Medicare Secondary Payer (MSP) rules based on age: A group health plan is the primary payer and Medicare is the secondary payer for individuals age 65 or over if their group health coverage is by virtue of the individual's (or his/her spouse’s) current employment status.
Who to count: Employees on each working day in at least 20 weeks in either the current or the preceding calendar year. The 20-employee test must be run at the time the individual receives the services for which Medicare benefits are claimed.
How to count: Count each full-time and part-time employee as one.
Consequences of noncompliance: Medicare can collect any incorrect claim payments directly from the employer, regardless of whether the employer's plan is fully insured or self-insured.
Employers with at least 50 employees
Law or compliance requriement applied:
Family and Medical Leave Act (FMLA): FMLA requires employers that sponsor group health plans to provide group health plan benefits to employees on an FMLA leave. Please note that public agencies and public and private schools are covered regardless of the number of employees.
Who to count: Employees working 20 or more weeks in the current or preceding calendar year within a 75 mile radius of the applicable work location.
How to count: Count each full-time and part-time employee as one.
Consequences of noncompliance: The EEOC may bring an action in court and individuals may file private lawsuits to correct violations and obtain appropriate legal or equitable relief (including attorney’s fees and other costs).
Applicable Large Employers (ALEs)
Law or compliance requriement applied:
Shared responsibility provisions of the Affordable Care Act (ACA): ALEs must offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees, must report to the IRS information about the health care coverage, if any, they offered to full-time employees, and must provide a statement to employees.
Who to count: Full-time employees and full-time equivalent (FTE) employees in each month of the preceding year. Divide this number by 12, and if the result is 50 or greater, the employer is an ALE for the current year.
How to count: Count full-time (30 or more hours per week determined on a monthly basis) and FTE employees as one. Aggregate part-time hours (no more than 120 hours per employee) and divide by 120 to determine FTEs. Special counting rules apply with respect to special situations, such as teachers, seasonal workers, etc.
Consequences of noncompliance: ALEs are subject to a penalty if one or more full-time employees are certified to the employer as having received an applicable premium tax credit or cost-sharing reduction, and either: 1) the employer fails to offer to its full-time employees (and their dependents) minimum essential coverage; or, 2) the employer's coverage is deemed to be unaffordable or does not provide minimum value (as defined by the ACA). Failure to file a return with the IRS or furnish a statement to employees can result in penalties up to $250 per return/statement, with a maximum penalty of $3 million.
Law or compliance requriement applied:
Mental Health Parity and Addiction Equity Act (MHPAEA):Group health plans that provide mental health coverage must provide parity between medical/surgical benefits and mental health/substance use disorder benefits.
Who to count: Employees on business days during the preceding calendar year.
How to count: Count each full-time and part-time employee as one.
Consequences of noncompliance: Individuals and the DOL may use ERISA's civil enforcement provisions to file lawsuits to enforce the MHPAEA's requirements. In addition, noncompliance with the MHPAEA can trigger an IRS excise tax.
Employers with 100 or more employees
Law or compliance requirement applied:
Medicare Secondary Payer (MSP) rules based on disability:A group health plan is the primary payer, and Medicare is the secondary payer for individuals under age 65 entitled to Medicare on the basis of a disability, if their group health coverage is by virtue of the individual's (or his/her spouse’s) current employment status.
Who to count: Employees on at least 50 percent of regular business days during the previous calendar year.
How to count: Count each full-time and part-time employee as one.
Consequences of noncompliance: Medicare can collect any incorrect claim payments directly from the employer, regardless of whether the employer's plan is fully insured or self-insured.
Welfare plans that cover at least 100 employees
Law or compliance requirement applied:
Form 5500: Employee benefit plans must file the Form 5500 reporting and disclosure document on an annual basis with the Department of Labor (DOL). Please note that the Form 5500 requirement applies to ERISA plans only.
Who to count: Employees enrolled in the plan at the beginning of the plan year.
How to count: Count each full-time and part-time employee as one.
Consequences of noncompliance: The penalty for failing to file a Form 5500 is $1,100 per day, which is cumulative from the filing deadline. Lesser penalties may be assessed for incomplete or otherwise deficient Form 5500s.
Employers that filed 250 or more W-2s
Law or compliance requirement applied:
Reporting the cost of health benefits on W-2: The Affordable Care Act (ACA) requires employers to report the total cost of employer-provided health coverage on Form W-2.
What to count: W-2s filed with the IRS in the preceding calendar year.
How to count: W-2s for full-time and part-time employees count as one.
Consequences of noncompliance: Penalties for compliance failures range from $30 to $250 per form.
All self-insured medical plans
Law or compliance requirement applied:
Transitional reinsurance program fee: The ACA requires self-insured group health plans to make contributions to help stabilize premiums for coverage in the individual market during the years 2014 through 2016.
Who to count: Covered lives, which includes both employee and dependent lives.
How to count: The fee is calculated based on the average number of covered lives, which can be determined using one of the following four methods:
- Actual Count: Add the total number of lives covered for each day of the first nine months of the calendar year and divide that total by the number of days in the first nine months.
- Snapshot Count: Add the total number of lives covered on any date during the same corresponding month in each of the first three quarters of the calendar year, and divide that total by the number of dates on which a count was made.
- Snapshot Factor: Use the Snapshot Count method, except the number of lives covered on a given date is calculated by adding the number of participants with self-only coverage to the product of the number of participants with coverage other than self-only coverage and a factor of 2.35. This method can be used to estimate the number of total lives included in coverage that is not self-only coverage.
- Form 5500 Method: The number of participants as of the beginning and end of the plan year as reported on Form 5500 for the last applicable time period.
Consequences of noncompliance: As with any amount owed to the federal government, an unpaid/underpaid Reinsurance Program Fee will be subject to federal debt collection rules.
All self-insured medical plans
Law or compliance requirement applied:
Patient-Centered Outcomes Research Institute (PCORI) fee:The PCORI fee supports the Patient-Centered Outcomes Research Trust Fund and will be imposed for each policy year ending on or after October 1, 2012 and before October 1, 2019.
Who to count: Covered lives, which includes both employee and dependent lives.
How to count: The fee is calculated based on the average number of covered lives, which can be determined using one of the following three methods:
- Actual Count Method: Add the total lives covered for each day of the plan year and divide that total by the total number of days in the plan year.
- Snapshot Method: Add the total number of lives covered on one date during the first, second or third month of each quarter, and divide that total by the number of dates on which a count was made.
- Form 5500 Method: The number of participants as of the beginning and end of the plan year as reported on Form 5500 for the last applicable time period.
Consequences of noncompliance: As with any amount owed to the federal government, an unpaid/underpaid PCORI Fee will be subject to federal debt collection rules.
2017 HSA Limits Released
Original post benefitspro.com
Change is not the order of the day for health savings account (HSA) limits in 2017.
The Internal Revenue Service (IRS) issued its new guidelines for contributions and out-of-pocket expenses for HSAs that are tied to a high-deductible plan this week.
Maximum OOPs for individual and family accounts won’t budge next year, and contributions will remain intact for family plans. Individual contributions increased slightly.
Here’s the run-down of the details:
- Out-of-pocket maximums are unchanged at $6,550 for individuals and $13,100 for families;
- Maximum contributions for family plans remain the same at $6,750;
- Individual contributions can increase from $3,350 to $3,400.
High deductible plans in 2017 will be those that have an annual deductible of least $1,300 for self-only coverage and $2,600 for family coverage.
HSAs are open to all men and women enrolled in a high-deductible health insurance program (exceeding $1,300 for individuals and $2,600 for family) aside from those policyholders currently covered by Medicare or listed as a dependent.
For both 2015 and 2016, IRS regulations mandating the potential contributions on plans covering families (a minimum of two people) held successive increases of $100. Individual restrictions, meanwhile, were bumped up by $50 in 2015, but remained stable the following year.
The annual fluctuations of HSA contribution levels are based directly upon federal cost of living adjustments. They will be applied for the calendar year of 2017.
A full account of the new guidelines may be read under Revenue Procedure 2016-28.
Compliance Alert: New Affordable Care Act FAQs Released
Original post jdsupra.com
The U.S. Department of Labor, the Department of Health and Human Services, and the Department of the Treasury (collectively, the “Departments”) have jointly issued a new set of answers to frequently asked questions about the Affordable Care Act (the “ACA”). Below are some highlights from the FAQs.
Rescissions of Coverage
The FAQs provides some specific guidance regarding rescissions of coverage that is of interest for K-12 schools and higher education institutions. Under the ACA, a plan generally cannot retroactively cancel coverage (referred to as a “rescission” of coverage) unless the participant commits fraud or makes an intentional misrepresentation of material fact prohibited by the terms of the plan. The FAQs answer a very specific question about rescissions, which may have broader application. The question raised by the FAQs is whether a school can retroactively cancel coverage for a teacher who was employed on a 10-month contract from August 1 to May 31 and gave notice of resignation on July 31. The plan attempted to terminate coverage retroactively to May 31. According to the FAQs, such a rescission violates the ACA’s restrictions.
Preventive Care Mandate
Under the ACA, non-grandfathered group health plans must cover certain preventive services without imposing any cost-sharing requirements. In the new FAQs, the Departments issued the following guidance regarding preventive services:
- Any required preparation for a preventive screening colonoscopy is an integral part of the procedure and must be covered without cost-sharing.
- Plans and issuers that use reasonable medical management techniques for specific methods of contraception can develop a standard exception form and instructions for providers to use in prescribing a particular service or FDA-approved item based on medical necessity. The Medicare Part D Coverage Determination Request Form can be used as a model in developing a standard exception form.
Additionally, the FAQs clarify that if a non-grandfathered plan pays a fixed amount (a “reference price”) for a particular procedure, the plan must either (1) ensure that participants have adequate access to quality providers that accept the reference price as payment in full or (2) count an individual’s out-of-pocket expenses for providers who do not accept the reference price toward the individual’s maximum out-of-pocket limit.
Out-of-Network Emergency Services Coverage
The ACA also prohibitsnon-grandfathered group health plans from imposing cost-sharing on out-of-network emergency services in an amount that is greater than that imposed for in-network emergency services. The statute does not specify whether “balance billing” is included in the definition of cost-sharing. “Balance billing” is the practice of providers billing a patient for the difference between the provider’s billed charges and the amount collected from the plan plus the amount collected from the patient in the form of a copay or coinsurance. To avoid circumvention of the ACA requirements, the Departments previously issued regulations requiring a plan or issuer to pay a reasonable amount before the patient becomes responsible for balance billing. Under this regulation, the plan or issuer must provide benefits at least equal to the greatest of: (1) the median amount negotiated with in-network providers for the emergency service; (2) the amount for the emergency service calculated using the same method the plan generally uses to determine payments for out-of-network services; or (3) the amount that would be paid under Medicare for the emergency service (collectively, the “Minimum Payment Standards”). The FAQs now make clear that plans that are subject to the Employee Retirement Income Security Act must disclose the documentation and data they use to calculate the Minimum Payment Standards (1) upon request by a participant (or authorized representative) or (2) if relevant to an appeal of an adverse benefit determination.
Mental Health Parity
Lastly, the Mental Health Parity and Addiction Equity Act (“MHPAEA”) and underlying regulations generally prohibit group health plans from imposing more restrictions on financial requirements and treatment limitations provided for mental health/substance abuse disorder services than the “predominant” financial requirements and treatment limitations that apply to “substantially all” medical/surgical services. “Substantially all” for this purpose is a requirement or limitations that apply to at least 2/3 of all medical/surgical benefits in a classification. If a limitation meets the substantially all requirement, then the “predominant” level that may apply to the mental health/substance abuse disorder benefits is the one that applies to more than half of the medical/surgical benefits within the classification. In the FAQs, the Departments clarify that when calculating the “substantially all” and “predominant” tests, a plan or issuer may not base its analysis on an issuer’s entire book of business for the year. Group health plan-specific data must be used where available. If not available, data from plans with similar structures and demographics can be used.
The FAQs also clarify that under MHPAEA, criteria for medical necessity determinations must be made available to any current or potential enrollee in a group health plan, not just active participants.
This is the 31st set of FAQs issued by the Departments on the ACA, which reflects the complexity of implementing the ACA’s many requirements.
How Employers Should Respond to Increased DOL Audits
Original post benefitnews.com
The Department of Labor says it will be stepping up enforcement efforts and employer audits, which should prompt brokers, who formerly worried little about such regulatory efforts, to prepare to serve as a trusted adviser to clients concerned about such efforts, says Julie Hulsey, president and CEO of Amarillo, Texas-based Zynia Business Solutions.
Speaking at an industry conference in Hollywood, Fla. last week, Hulsey said employers are feeling pressured by the weight of increased DOL and health care reform regulations and brokers need to stay up to date on regulations, including those related to the Affordable Care Act and ERISA.
The ACA reporting requirements have brought increased scrutiny of employer-sponsored health care plans and the government is largely expected to respond to anomalies or red flags with an employer audit. But industry experts agree the government won’t limit its inquiries to ACA-related information only, and employers should be prepared for full-blown audits of health care plans.
Quoting from a DOL presentation in Austin, Texas, Hulsey says the Department said, “leniency is over; the EBSA has staffed up and is focusing its resources on health and welfare plan ERISA compliance.”
Additionally, in her small Texas town alone, she says she’s heard that the DOL has added 10-12 auditors, who are conducting random audits of employers, mostly on the smaller employee size.
Increased compliance needs can be a strain for small employers, some of which may not even have a designated Human Resources department or manager.
When a DOL audit is announced, an employer’s first phone call will be their broker or an attorney.
Among the topics that brokers should be aware,
- Variable Employee Testing: Based on employee classifications, an employer can group employees into different groups, such as part-time and seasonal.
- HR 3236-The Transportation and Veteran Health care Choice Improvement Act of 2016: This Act regulates that employees covered by Tricare can be excluded from counting employee numbers.
- Cadillac Tax: Although delayed until 2020, it is important to start planning now.
- Waivers: If employers offer a minimum-essential coverage plan that meets affordable and minimum value test and an employee declines coverage, it is important the employer have a signed waiver. “That waiver is gold,” Hulsey said.
- Individual Mandate: The period will run from Nov. 1, 2016 to Jan. 31, 2016.
- Special Enrollment Period: Presenting a sales opportunity to brokers, these enrollment periods take affect when an employee experiences any change that affects income or household size, such as becoming pregnant. Other special enrollments include marriage/divorce, changing place of residence and having a change in disability.
The DOL has the authority to audit for compliance with several laws, including the ACA, HIPAA and the Mental Health Parity and Addiction Equity Act. They also have the authority to audit for minimum loss ratio rebates and PECORI fees.
IRS: Skip Form 5500’s Optional Compliance Questions
Original post shrm.org
The Internal Revenue Service (IRS) recently added new questions to the 2015 Form 5500 and 5500-SF (short form) annual retirement plan returns. The Form 5500 series of returns are used by retirement plans to report the financial condition, investments and operations of the plans to the Department of Labor (DOL) and IRS.
When the new IRS compliance questions were originally introduced, the IRS described the questions as optional for plan year 2015. However, in its most recent instructions, the IRS has specifically advised plan sponsors not to complete these questions for the 2015 plan year.
The IRS decision to delay completion is due to privacy and misreporting concerns raised by retirement plan administrators and advisors.
The new compliance questions are intended to aid the IRS in determining whether a retirement plan, such as a 401(k) plan, is in compliance with applicable law—in particular, how the plan is satisfying discrimination testing and making timely plan amendments. The new questions also ask whether the plan trust incurred unrelated business taxable income and if the plan made in-service distributions, such as hardships. Specifically, the following new lines were added:
Form 5500 Annual Return (Report of Employee Benefit Plan)
• Provide preparer information including name, address and telephone number.
Schedules H (Financial Informaiton) and Schedule I (Small Plan Financial Information)
• Did the plan trust incur unrelated business taxable income?
• Were in-service distributions made during the plan year?
• Provide trust information including trust name, EIN, and name and telephone number of trustee or custodian.
Schedule R (Retirement Plan Information) – New Part VII: IRS Compliance Questions
• Is the plan a 401(k) plan?
• How does the 401(k) plan satisfy the nondiscrimination requirements for employee deferrals and employer matching contributions?
• If the Average Deferral Percentage (ADP) test or Average Contribution Percentage (ACP) test is used, did the plan perform testing using the “current year testing method” for non-highly compensated employees?
• Did the plan use the ratio percentage test or the average benefit test to satisfy the coverage requirements under Section 410(b)?
• Does the plan satisfy the coverage and nondiscrimination tests by combining this plan with any other plans under the permissive aggregation rules?
• Has the plan been timely amended for all required tax law changes?
• Provide the date of the last plan amendment/restatement for the required tax law changes.
• If the plan sponsor is an adopter of a pre-approved master and prototype or volume submitter plan that is subject to a favorable IRS opinion or advisory letter, provide the date and serial number of that letter.
• If the plan is an individually-designed plan and received a favorable determination letter from the IRS, provide the date of the plan’s last favorable determination letter.
• Is the plan maintained in a U.S. territory?
Form 5500-SF Annual Return (Report of Small Employee Benefit Plan)
• Asks for all the information added to the Forms and Schedules above.
• Were required minimum distributions made to 5 percent owners who have attained age 70½?
When plan sponsors and plan administrators are eventually required to respond to these new questions, their responses could highlight plan compliance issues of which the plan sponsor or the IRS may not have been aware, and could lead to follow-up investigations from the IRS. The new questions are helpful guidance for plan sponsors to make certain that their 401(k) and 403(b) plans are in compliance.
CMS Issues 2017 Benefit and Payment Parameters Rule, Letter to Issuers and FAQ
Original post healthaffairs.org
On February 29, 2016, the Department of Health and Human Services released its final 2017 Benefit and Payment Parameters Rule (with fact sheet) and final 2017 Letter to Issuers in the Federally Facilitated Marketplaces (FFMs). It also released a bulletin on rate filings for individual and small group non-grandfathered plans during 2016, a frequently asked questions documenton the 2017 moratorium on the health insurance provider fee recently adopted by Congress, and a bulletin announcing that CMS intends to allow transitional (grandmothered) policies to continue (if states permit it) through December 31, 2017, rather than requiring them to terminate by October 1, 2017, as earlier announced.
The final payment rule and letter include most of the provisions proposed earlier, but differ in important respects.Here are a few headlines, focusing on issues of particular interest to health insurance consumers.
Standardized Plans
To begin, the final rule and letter adopt with a few changes proposals regarding standardized plans. Beginning in 2017, qualified health plan insurers would have the option of offering six standardized plans: a bronze, a gold, and a standard silver, as well as three silver plan options, at the 73 percent, 87 percent, and 94 percent actuarial-value levels, for individuals eligible for cost sharing reduction payments. The plans would have
- standard deductibles (ranging from $6,650 for the bronze plan to $3,500 for the standard silver to $250 for the 94 percent silver cost-sharing variation),
- four-tier drug formularies,
- only one in-network provider tier,
- deductible-free services (for the silver level plan including urgent care, primary care visits, specialist visits, and drugs),
- and a preference for copayments over coinsurance.
Insurers will not be required to offer standardized plans and could offer non-standardized plans (as long as they met meaningful difference standards), but standardized plans will be displayed in the marketplaces a manner that will make them easy for consumers to find.
Network Adequacy Requirements
The final rule and letter adopt some, but not all of the network adequacy requirements that were proposed, and delay some until 2018. The NPRM payment rule would have required states to adopt time and distance network adequacy standards for 2017 and imposed a federal default time and distance standard in states that failed to do so. The final rule backs off this requirement but provides that the FFM will itself generally apply quantitative time and distance standards in determining network adequacy for qualified health plans.
Provider Termination Notice
The final rule requires that health plans give patients 30 days notice when terminating a provider and continue to offer coverage for up to 90 days for a patient in active treatment by a provider who is terminated without cause. The insurer would only have to pay network rates to a provider for continuation coverage and the provider could balance bill. CMS is proceeding with its proposal to label health plans as to their relative network breadth on HealthCare.gov.
Out-Of-Network Bills At In-Network Facilities
CMS is not finalizing until 2018 a requirement the insurers apply to the in-network cost sharing limit the cost of services provided by out-of-network providers at an in-network facility; the agency is also weakening this already weak requirement. As finalized, the requirement only applies to ancillary providers, such as anesthesiologists or radiologists; can be avoided by giving notice (including form notice) 48 hours ahead of time or at the time of prior authorization that treatment might be received from out-of-network providers; and does not apply to balance bills as such where the provider bills for the difference between its charge and the network payment rate.
Open Enrollment Period And Procedures
Open enrollment for 2017 and 2018 will last from November 1 until January 31, as was true this year, but in future years, open enrollment will run from November 1 to December 15, to align enrollment with the calendar year. CMS is not finalizing until 2018 a proposal to allow applicants to remain on a web broker’s or insurer’s non-FFM website to complete a Marketplace applicant and enroll in coverage. Until then, web brokers and insurers will have to use the current direct enrollment process.
The rule changes the reenrollment hierarchy, requiring marketplaces to prioritize reenrollment in silver plans and allowing marketplaces to enroll consumers into plans offered by other insurers if their insurer does not have a plan available for reenrollment through the marketplace. Other proposals to change the reenrollment process were not adopted.
FFM User Fees In State Marketplaces
The final rule and letter finalize the status of state-based marketplaces using the federal enrollment platform, which this year included Hawaii, Oregon, Nevada, and New Mexico. In future years insurers in these states will pay a FFM user fee of 3 percent, but for 2017 the user fee will be 1.5 percent. The standard user fee for other FFM states will be 3.5 percent again for 2017.
Navigators In The FFMs
The final rule requires navigators in FFMs as of 2018 to provide consumers with post-enrollment assistance, including assistance with filing eligibility appeals (though not representing the consumer in the appeal), filing for shared responsibility exemptions, providing basic information regarding the reconciliation of premium tax credits, and understanding basic concepts related to using health coverage. Navigators will also be required to provide targeted assistance to vulnerable or underserved populations.
“Vertical Choice” In The FF-SHOPs
The final rule allows FF-SHOPs to offer a “vertical choice” option, under which employers could allow their employees to choose any plan at any actuarial level offered by a single carrier. This is in addition to the options currently available where employers can offer a single plan or any plans offered by an insurer at a single level. States could recommend against the FF-SHOP offering vertical choice in their states and states with state-based marketplaces using the FFM could opt out of making vertical choice available.
Fraud Prevention In The Medical Loss Ratio Calculation
CMS decided not to allow insurers to count fraud prevention expenses in the numerator in calculating their medical loss ratios, as it had suggested it might in the NPRM.
Other Topics
The insurer fee FAQ clarifies that insurers will not be charged the insurer fee for the 2017 fee year (which would have based the fee on 2016 data). Insurers are expected to adjust their premiums downward to account for the fact that they will not owe the fee.
CMS is allowing states to extend transitional plans, which antedate 2014 and do not have to comply with the 2014 ACA insurance reforms through the end of 2017. Earlier guidance had allowed insurers to renew transitional plans ending before October 1, 2017. CMS concluded that it would be better to allow people in transitional plans to transition into ACA compliant plans during the 2018 open enrollment period rather than having them start a new ACA compliant plan in October 2017 that would only last for three months, and then have to restart a new deductible on January 1, 2018.
There is much more in the rule and letter. The rule is well over 500 pages long, the letter almost 100. Watch for further installments over the next couple of days.
Using Compliance Reviews to Prepare Employers for Audit
Original post benefitsnews.com
A retirement plan sponsor has a fiduciary duty to ensure that the plan complies with all federal and state rules and regulations. Plan sponsors must follow the plan’s provisions without deviating from them unless the plan has been amended accordingly. Failure to follow the provisions can lead to plan disqualification. For the 2015 fiscal year, the Employee Benefits Security Administration reported that 67.2% of employee benefit plans investigated resulted in financial penalties or other corrective actions.
An operational compliance review can help. It’s different from a financial audit. An audit reviews the plan as it relates to the presentation of financial data; it is not designed to ensure compliance with all of ERISA’s provisions or other requirements applicable under the Internal Revenue Code. Operational compliance reviews, on the other hand, are concerned with validating the process being reviewed, with no restriction on whether it impacts the financials. An operational compliance reviewer wants to know that the process works, whether it is replicable, and consistent with the plan document.
Where to Begin
First, employers need to define the scope of the plan. To help define the scope, advisers and employers consider the following questions:
- Does the plan sponsor have a prototype, volume submitter, or individually designed plan document?
- Have there been any recent changes to the plan document?
- Have there been any changes to any of the service providers, including payroll and record keepers, over the past few years?
- Has the plan sponsor had to perform any corrections recently, perhaps without fully understanding how the errors occurred?
- Have there been any data changes or file changes as they are provided to the record keeper?
- Is there money in the budget to cover the review?
With the scope defined, a thorough operational compliance review should involve the following key steps:
- Review of the plan document and amendments, along with summary plan descriptions and a summary of material modifications;
- Review of required notices sent to participants, such as quarterly statements, initial and annual 404(a)(5) participant fee disclosures, Qualified Default Investment Alternative notices, safe harbor notices, etc.;
- Review of service provider contracts, such as record keepers and trustees/custodians;
- Discussions with the people who administer the plan, which may include the record keeper, trustee/custodian, payroll and benefits administration personnel;
- Review of plan administrative manuals, record keeper operational manuals, procedural documents and policy statements; and
- Review of sample participant transactions and data for each of the areas being reviewed.
Reviewing and comparing a record keeper’s administrative or operational manual with the plan document is an essential step in the review process. There tends to be a higher propensity for errors to occur when a record keeper is administering a plan that has an individually designed document versus its own prototype document. Lack of documented procedures can be cause for concern in ensuring the consistency and integrity of administering the plan, especially when there are any changes to the record keeping infrastructure, such as changes to plan provisions, modifications or upgrades to the record keeping system, or even personnel turnover.
While this process may lead to the discovery of errors you don’t necessarily want to find, you do want to gain perspective and overall confidence on your plan’s operations. Aside from finding errors, here are some things you should capture from an operational compliance review:
Areas of improvement for operational efficiency, including opportunities to maximize record keeper’s outsourcing capabilities;
- Answers to questions on whether the plan’s provisions and administration would be considered “typical”, and how they compare to industry best practices;
- An overall rating or report card of how a record keeper or service provider compares to industry peers; and
- Confidence that if your client’s plan is approached by the DOL or IRS, it’s ready for an investigation that will conclude with a letter saying “no further action is contemplated at this time”.
Embarking on an operational review may seem intimidating but, with a well-thought-out plan, process, and the right resources, a successful review will uncover potential issues that can be resolved the IRS or DOL arrive at your client’s door. The rewards for your efforts may include perspective on industry best practices and how you can operate the plan more efficiently.