DOL and IRS want a closer look at your retirement plan
Are you worried that your company's retirement plan is not up to government standards? If so take a look at this article from HR Morning about what the DOL and IRS are looking for in retirement plans by Jared Bilski
Two of the most-feared government agencies for employers — the DOL and IRS — have decided there’s a real problem with the way retirement plans are being run, and they’re ramping up their audits to find out why that is.
In response to the many mistakes the agencies are seeing from retirement plan sponsors, the IRS and DOL will be increasing the frequency of their audits.
What does that mean for you? According to experts, plan sponsors can expect the feds to dig deep into the minute operations of plans. That means the unfortunate employers who find themselves in the midst of an audit can expect to be asked for heaps of plan info.
Linda Canafax, a senior retirement consultant with Willis Towers Watson, put it like this:
“The DOL and IRS are truly diving deep into the operations of the plans. We have seen a deeper dive into the operations of plans, particularly with data. Plans may be asked for a full census file on the transactions for each participant. Expect the DOL and IRS to do a lot of data mining.”
What to watch for
Ultimately, it’s impossible to completely prevent an audit. But employers can — and should — do certain things to safeguard themselves in the event the feds come knocking.
First, a self-audit is always a good idea. It’s always better for you to discover any problems before the feds do. Next, you’ll want to be on the lookout for the types of errors that can lead the feds to your workplace in the first place.
The most common errors the IRS and the DOL are looking for:
- Untimely remittance of employee deferrals (i.e., contributions)
- Incorrect compensation definition (plan documents dictate which types of comp employees are eligible to contribute from)
- Not following the plan’s own directives, and
- Not having a good long-term system (20-30 years out) for tracking and paying benefits to vested participants.
See the original article Here.
Source:
Bilski J. (2017 January 6). DOL and IRS want a closer look at your retirement plan[Web blog post]. Retrieved from address https://www.hrmorning.com/dol-and-irs-want-to-take-a-closer-look-at-your-retirement-plan/
The big trends that will reshape retirement in 2017
Great article from Employee Benefits Advisor, by Bruce Shutan
Seven isn’t just a lucky number for rolling the dice in Vegas; it’s also a solid measure of key trends in retirement planning to watch in the coming year. Here’s what a handful of industry observers believe should be on the proverbial radar for HR and benefit professionals.
Between compliance with fee-disclosure requirements and a growing number of class-action lawsuits on 401(k) plan fees, many plan sponsors have sought more fiduciary partners to help them implement defined contribution plans. The observation comes from Josh Cohen, managing director, defined contribution at Russell Investments. In light of this litigation, he warns that choosing the lowest possible price may not necessarily be the best value or choice for helping improve retirement readiness.
Trisha Brambley, CEO of Retirement Playbook, says it’s critical to vet the team of prospective advisers and the intellectual capital they offer. Her firm offers employers a trademarked service that’s akin to a request for information that simplifies and speeds the competitive bidding process.
While the incoming Trump administration could delay, materially modify or altogether repeal the Department of Labor’s final fiduciary rule, it cannot reverse a “new awareness around the harm that’s created by conflicted advisers and brokers,” cautions David Ramirez, a co-founder of ForUsAll who heads the startup’s investment management. He expects plan sponsors who are managing at least $2 million in their 401(k) to continue asking sophisticated questions about the fiduciary roles his firm and other service providers assume and how they’re compensated. Ramirez points to a marketplace that’s demanding greater transparency, accountability and alignment of goals and incentives irrespective of what the DOL may require.
One way to improve the nation’s retirement readiness is by “fixing all of the broken 401(k) plans with between $2 million and $20 million in assets” that are paying too much in fees, doing too much administrative work or taking on too much liability, according to Ramirez. “In 2014, nearly three out of four companies failed their 401(k) audit and faced fines,” he notes, adding that last year the DOL flagged about four of 10 audits for having material deficiencies with the number being as high as two-thirds in some segments.
While litigation over high fees and the DOL’s fiduciary rule may not have a significant impact on small and mid-market plans, they’re spotlighting the need to make more careful decisions that are in the best interest of plan participants. That’s the sense of Fred Barstein, founder and executive director of the Retirement Adviser University, which is offered in collaboration with the UCLA Anderson School of Management Executive Education. He predicts there will be less revenue sharing in the institutional funds arena and better vetting of recordkeepers, money managers and plan advisers in terms of their fees and level of experience.
Default-driven plan design
Noting that it’s been 10 years since passage of the Pension Protection Act, Cohen says default-driven plan design continues to have a major impact on retirement planning. The trend is fueled by qualified default investment alternative options that encourage appropriate investment of employee assets in vehicles that will maximize long-term savings. He predicts “further customization” of off-the-shelf target date funds at the individual level based on each participant’s own unique situation and experiences. Moreover, he sees more use of a robo-adviser type framework built around managed accounts, while participants with a complex financial picture will seek a more tailored solution that fits their needs.
Financial wellness
Financial wellness cuts across virtually any demographic, Cohen notes. The point is to help balance household budgets with retirement-saving goals, “whether it involves millennials dealing with student debt or middle-aged parents dealing with college tuition, a mortgage or credit card debt,” he explains. He sees the use of more creative ideas, tools and support, such as encouraging young employees to pay off student loans by making a matching contribution to their 401(k).
For employers, a key to reaching millennials on financial wellness is through text messages over all other means of communication, suggests Ramirez, whose firm is able to get 18- to 24-year-olds saving 6.7% on average and 25 to 29-year-olds 7.3%. As part of that strategy, he says it’s important to set realistic goals, such as new entrants into the workforce deferring 6% of their salary before increasing that amount with rising earnings. The idea is to establish a culture that turns millennials into super savers.
“We’re seeing employers help their employees with just setting a basic budget,” says Rob Austin, director of retirement research for Aon Hewitt. “It can also move into things like saving for other life stages.”
Aon Hewitt recently released a report on financial wellness showing that 28% of all workers have student loans. While researchers noted that roughly half of millennials were saddled with this debt, the margin was cut in half for Gen Xers (about 25%) workers and halved again for baby boomers (about 12.5%). The employer response has been somewhat tepid, according to Austin. For example, just 3% of companies help employees pay for student loans, about 5% help consolidate those loans and 15% offer a 529 plan.
Financial wellness is being expanded and embedded into retirement programs to serve a growing need for more holistic information, observes Brambley. “A lot of people don’t even know how to manage a credit card, let alone figure out how to scrape up a few extra bucks to put in their 401(k) plan,” she says.
401(k) plan fees
Ted Benna, a thought leader in the retirement planning community commonly referred to as the “father of 401(k),” found earlier in the year “a very high level of indifference” among plan sponsors about the prices they pay for recordkeeping, investment management services and related costs. He says this was the case even at companies with “pretty outrageously high fees,” which proved to be a big shock for him.
The discovery coincided with the start of his latest advisory venture, which was designed to help shepherd sponsors through the 401(k) fee minefield with objective information to determine that the fees they were paying were reasonable and, thus, in the best interest of participants. But Benna didn’t see much demand for the service he envisioned, so he’s now in the throes of writing his fifth book, whose working title is “Escaping the Coming Retirement Crisis Revisited.”
Litigation over high fees has at least raised awareness among plan sponsors about the need for reasonable prices, along with sound investment offerings, as regulators step up their scrutiny of fiduciary duties, Austin says. While not necessarily related, he has noticed that nearly as many employers are now charging their administrative fees as a flat dollar amount vs. those that historically charge a percentage of one’s account balance. “If you have a $100,000 balance, and I have a $1,000 balance, you and I have access to the same tools and same funds,” he reasons. “So why would you pay 100 times what I’m paying just because your balance is higher?”
Greater automation
With increasing automation on the horizon, Ramirez notes that 401(k) plans are moving into cloud-based technology that will streamline core business processes and avoid careless errors.
For instance, that means no longer having to manually sync the 401(k) with payroll when employees change their deferral rate or download the payroll report to a 401(k) plan recordkeeper. “That’s 1990s technology,” he quips. “Signing up for the 401(k) can be as easy as posting a picture on Instagram or sending a tweet.”
Apart from vastly reducing the administrative burden, he says it also allows makes it easier for plan participants to enroll, increase deferrals, receive better advice based on algorithmic formulas and improve communications. The upshot is that when all these pieces of the puzzle are in place, ForUsAll has found that participants in the plans it manages save on average 8% of their pay across all industries and demographics.
Barstein believes there’s still going to be a lot of movement toward auto-enrollment and escalation, as well as the use of professionally managed investments like target-date funds, which he predicts will become more customized. “We’re starting to see where participants in one plan can choose a conservative, aggressive, or moderate version of a target date,” he says of efforts to improve an employee’s financial wellness.
Streamlined investments
Brambley sees a movement toward investment menu consolidation. She remembers how it was customary for employers to offer three to four distinctively different investment funds in the early years of 401(k) plans, which later gave way to about 20 such offerings on average. The push is now to weed out any duplication of so-called graveyard funds because she says “there’s some fiduciary risk to continue to offer them when they no longer meet the criteria on their investment policy statement.”
Cohen agrees that plan sponsors continue to see the benefit of streamlining the menu of options for a more manageable load. As part of that movement, he sees the adoption of “white labeling” of investment options that replaces opaque, retail-branded fund names with accurate generic descriptions. For example, they would reflect asset classes (i.e., the Bond Fund or the Stock Fund). The thinking is that this approach will generate more meaningful or practical value for participants whose knowledge of basic financial principles is limited.
Confining the selection of investments to a handful of funds in distinctly different asset classes will invariably make the process much easier for participants, Brambley suggests. This enables plan sponsors to wield “more negotiating power” on pricing because they have funds collecting under various asset-class headings, she explains.
Recordkeeper consolidation
Recordkeeper consolidation is going to continue, according to Barstein, who sees organizations that lack technology, scale and the support of their parent company will not survive marketplace change.
The most noteworthy activity will involve big-name mergers as opposed to scores of recordkeepers leaving or merging, he believes.
“If I was a plan sponsor, I’d be concerned because nobody really wants to go through a conversion,” Barstein says. “I’m sure JP Morgan forced a lot of their clients to either consider changing when they went through the acquisition by Empower.”
See the original article Here.
Source:
Shutan B.(2016 December 7). The big trends that will reshape retirement in 2017[Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/the-big-trends-that-will-reshape-retirement-in-2017
Court denies NAFA in DOL fiduciary rule case
Department of Labor fiduciary rule survives its first challenge, by Nick Thornton
The National Association for Fixed Annuities has lost its challenge to the Department of Labor’s fiduciary rule.
In a decision issued today in the United States District Court for the District of Columbia, Judge Randolph Moss denied NAFA’s motions for a preliminary injunction and summary judgment.
Among other things, NAFA claimed DOL violated the Administrative Procedure Act when it shifted the regulation of fixed indexed annuities to the rule’s Best Interest Contract Exemption. In the proposed version of the rule, FIAs were scheduled for regulation under the less restrictive Prohibited Transaction Exemption 84-24.
In shifting FIAs to the BIC exemption in the final rule, NAFA argued industry was not given adequate notice to comment on the implications, as the APA requires.
But Judge Moss cited case law showing that a final rule “need not be the one proposed” in the rulemaking process.
“It is enough that the final rule constitute a logical outgrowth” of the proposed version, wrote Moss.
Moss reasoned that NAFA was given adequate notice that the Department was considering regulating FIAs under the BIC exemption when it explicitly sought comments on whether annuities were adequately regulated in the proposal.
NAFA argued the proposal gave “no inkling whatsoever that the Department was considering moving FIAs from PTE 84-24 to the BIC.”
But Moss ruled that NAFA’s reading of the proposal, and DOL’s request for comment on the viability of how annuities were treated, was “not tenable.”
“The Department expressly requested comment on its decision to ‘continue to allow IRA transactions involving’ fixed indexed annuities ‘to occur under the conditions of PTE 84-24,” wrote Moss.
“That is, it (DOL) asked whether fixed indexed annuities should be grouped under PTE 84-24 or not,” added Moss. “And, if there were any doubt on this, it would be put to rest by the fact that NAFA, along with other industry groups, provided comments on that very issue.”
Full analysis of the ruling will follow.
See the original article Here.
Source:
Thornton, N. (2016 November 04). Court denies NAFA in DOL fiduciary rule case. [Web blog post]. Retrieved from address https://www.benefitspro.com/2016/11/04/court-denies-nafa-in-dol-fiduciary-rule-case?ref=hp-news&slreturn=1478547367
Beware: Losing health plan grandfathered status is an administrative nightmare
Some interesting points on grandfathered status' from HRMorning, by Jared Bilski
Employers that have managed to keep their grandfathered status until now may think they’re immune from the hassles of the ACA, but a recent DOL investigation is a good reminder that the feds are always watching for a slipup.
Sierra Pacific Industries Health Plan was one of the few remaining grandfathered plans in existence, and they managed to keep that status for years after the ACA took effect.
But, according to a DOL investigation, the plan made some changes beginning on Jan. 1, 2013, that prevented the plan from keeping its grandfathered status and led to a relinquishing of that status in the feds’ eyes.
Those plan changes, as well as how the plan made determinations on employee health claims, violated both the ACA (specifically the provisions on preventive health services and internal claims and appeals rules) and ERISA, the DOL claimed.
‘Operating as though it were exempt’
As the DOL’s Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi said:
“The Affordable Care Act put into place standards and protections for workers covered by employee benefit plans. The Sierra Pacific plan was operating as though it was exempt from such requirements, when indeed, it was not. This settlement means that workers improperly denied health benefits will have their claims paid. Corrections made to plan procedures will also mean that all future claims are processed and paid properly.”
No premium or deductible bumps
The end result of the feds’ investigation: A lot of administrative work and changes for Sierra Pacific.
As part of the settlement, plan fiduciaries agreed to comply with the ACA requirements for non-grandfathered plans moving forward, specifically the rules for internal claims and appeals and coverage of preventive health services.
Plus, for the 2017 plan year, the company will have to forgo any increases to participant premiums, annual out-of-pocket limits, annual deductible and coinsurance percentages in effect for the 2016 plan year.
On top of all that, the company agreed to:
- Revise plan documents and internal procedures.
- Re-adjudicate past claims for preventive services, out-of-network emergency services, claims affected by an annual limit and pay claims in compliance with the ACA and ERISA.
- Submit to an independent review organization claims were eligible for external review.
- Pay claims that had been left on hold for a long time.
- Comply with timelines for deciding claims as provided in the department’s claim regulation.
See the original article Here.
Source:
Bilski, J. (2016 October 14). Beware: losing health plan grandfathered status is an administrative nightmare. [Web blog post]. Retrieved from address https://www.hrmorning.com/beware-losing-health-plan-grandfathered-status-is-an-administrative-nightmare/
Executive order forces DOL to enact final rule on paid sick leave
Interesting read about the new DOL final rule from Employee Benefit Adviser, by Leanne Mehrman
The U.S. Department of Labor acted on President Obama’s Executive Order 13706 (EO) and released a final rule implementing the requirements for federal contractors and subcontractors to provide employees with paid sick leave. Specifically, contractors must provide one hour of paid sick leave for every 30 hours worked on or in connection with a covered contract, for at least 56 hours per year, and subject to certain limitations. The requirements will take effect for covered contracts entered into on or after January 1, 2017.
An employee may use the leave for his or her own physical or mental illness, injury, medical condition, treatment or diagnosis as well as that of any person with whom the employee has a significant personal bond that is or is like a family relationship, regardless of biological or legal relationship. This includes such relationships as grandparent and grandchild, brother- and sister-in-law, fiancé and fiancée, cousin, aunt, and uncle. It could also include others with whom the employee has a family-like relationship such as a foster child or foster parent, a friend of a family, or even an elderly neighbor in certain circumstances.
An employee may also use the leave for absences from work resulting from domestic violence, sexual assault, or stalking, if the leave is for the reasons described above or to obtain additional counseling, seek relocation, seek assistance from a victim services organization or to take related legal action. The leave for domestic violence, sexual assault or stalking is available for the employee and for the employee to assist a related individual as described above.
Covered contracts: The EO and Final Rule apply to contracts and contract-like instruments (which will be defined in DOL regulations) if the contract is:
- a procurement contract for services or construction;
- a contract for services covered by the Service Contract Act (SCA);
- a contract for concessions, including any concessions contract excluded by DOL regulations at 29 CFR 4.133(b); or
- a contract or contract-like instrument entered into with the federal government in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public; and
The wages of employees under these contracts are covered by the Davis Bacon Act (DBA), the SCA or the Fair Labor Standards Act (FLSA), including employees who are exempt from the FLSA's minimum wage and overtime provisions.
For contracts covered by the SCA or DBA, the EO and Final Rule apply only to contracts at the thresholds specified by those statutes. For procurement contracts in which employees' wages are covered by the FLSA, the EO and Final Rule apply only to contracts that exceed the micro-purchase threshold as defined in 41 U.S.C. 1902(a), unless expressly made subject to this order pursuant to DOL regulations.
Highlights of the final rule requirements include:
- Accrued sick leave must be carried over from year to year;
- Contractors must reinstate accrued sick leave for employees rehired by a covered contractor within 12 months after job separation;
- Contractors are not required to pay a separating employee for unused sick leave upon separation;
- Contractors must inform an employee, in writing, of the amount of paid sick leave accrued but not used no less than once each pay period or each month, whichever is shorter;
- Contractors cannot require the employee to find a replacement worker as a condition for using the paid sick leave;
- Contractors covered by the SCA or DBA will not receive credit toward their prevailing wage or fringe benefit obligations under these acts by providing the paid sick leave required by the EO;
- A contractor's existing paid sick leave policy provided in addition to the fulfillment of the SCA or DBA requirements, which is made available to all employees, fulfills the requirements of the EO and Final Rule if it permits employees to take at least the same amount of leave as provided by the EO for the same reasons;
- Employees must provide written or verbal notice of the need for leave at least seven days in advance if the leave is foreseeable and as soon as practicable when the need for the leave is not foreseeable;
- A contractor may only require certification of the need for the leave for absences of three or more consecutive days, but only if the employee received notice of the requirement to provide certification or documentation before returning to work;
- A contractor’s existing PTO policy can fulfill the paid sick leave requirements of the EO as long as it provides employees with at least the same rights and benefits that the Final Rule requires if the employee chooses to use that PTO for the purposes covered by the EO;
- Contractors may not interfere with or retaliate against employees taking or attempting to take leave or otherwise asserting rights under the EO;
- Contractors must still comply with federal, state or local laws or collective bargaining agreement provisions that require greater paid sick leave than required by the EO.
SCA health and welfare benefit rate to be adjusted: The DOL’s Wage and Hour Division (WHD) will be announcing an SCA health and welfare benefit rate specifically for federal contractors whose employees receive paid leave pursuant to the EO and Final Rule. This rate is expected to be lower than it would be without consideration of the provision of this paid sick leave.
Recordkeeping requirements: Contractors will be required to make and maintain records for purposes of the EO and Final Rule, including:
- Copies of notifications to employees of the amount of paid sick leave accrued;
- Denials of employees’ requests to use paid sick leave;
- Dates and amounts of paid sick leave employees use; and
- Other records showing the tracking of employees’ accrual and use of paid sick leave.
As with other leave laws, federal contractors must also keep employees’ medical records, as well as records relating to domestic violence, sexual assault, and stalking, separate from other records and confidential.
Employers’ bottom line
Federal contractors who anticipate entering into contracts that will be subject to Executive Order 13706 should do the following: First, review any current PTO/sick leave policy to determine if any revisions may be needed to bring it into compliance with the EO and Final Rule. Second, review the current payroll system to ensure that it has the capabilities to track the amount of paid time off accrued and taken, and timely advise employees. And finally, become familiar with the specific and detailed requirements contained in the Final Rule to ensure compliance upon entry into the first covered contract.
See the original article Here.
Source:
Mehrman, L. (2016 October 6). Executive order forces DOL to enact final rule on paid sick leave. [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/executive-order-forces-dol-to-enact-final-rule-on-paid-sick-leave
Robo-advisers play increasingly important role
Are you reaching all of your employee's for financial advising? Robo-advisers allow employee's to review materials in their own time but it's important to find the right balance. See the article below from Employee Benefit Adviser by Nick Otto on the potential perks of Robo-advisers.
Original article posted on EmployeeBenefitAdviser.co
Posted on September 29, 2016
Technology is increasingly evolving: from miniature scanners that monitor a cancer patient’s chemotherapy treatments right down to financial advice being offered to more than just the 1%.
The retirement landscape should no longer be a one-size-fits-all approach, said Andrew Wank, director of business development at Bloom. From the DIY to the HENRYs (high earners not rich yet), there is a middle group of employees that can be a challenge to reach in providing retirement advice, he added.
Robo-advisers lend themselves to helping employees in all aspects of life, Wank said Wednesday at EBA's Workplace Benefits Summit in Nashville, Tenn. “Plan sponsors recognize the limitations of what they’re already doing,” he said. “How can we provide a service or solution?”
Robo-advisers can be that solution, panelists agreed, because they reach all kinds of employees who don’t have easy access to financial advice. It combines technology with a human touch to most benefit employees, Wank said.
“Selecting a robo-adviser is going to be the same sort of process as picking your adviser,” added The Wagner Law Group’s Tom Clark, in agreement. “Make the decision in the best interest of your plan participants.”
And with the DOL’s effects coming into play in April, Betterment for Business’ General Manager, Cynthia Loh, added that while the final rule is widely talked about, it still isn’t very well understood.
“Explore all your options out there,” she advised. “Employees are more likely to engage with digital tools they can look at on their time. But given where we are today, it’s prudent with the DOL rule coming, on what’s out there. Make sure you understand what your fees are and what your employees are getting and what your employees’ needs are.”
See the Original Article Here.
Source:
Otto, N. (2016, September 29). Robo-advisers play increasingly important role [Web log post]. Retrieved from https://www.employeebenefitadviser.com/news/robo-advisers-play-increasingly-important-role
Form 5500 changes could increase obligations for plan sponsors
With proposed changes to Form 5500, small business may need to be prepared to stay in compliance as exemption statuses may change. See the article by Joseph K. Urwitz, Srarh Engle and Megan Mard fro Employee Benefit Adviser.
Historically, Form 5500 has served primarily as an information return used by plan administrators and employers to satisfy their reporting obligations under the Employee Retirement Income Security Act and the Internal Revenue Code. However, the DOL and IRS are increasingly relying on information reported on Form 5500 as a key component of their compliance and enforcement initiatives.
As a result, the proposed revisions to Form 5500 would add a number of new reporting requirements designed to aid the DOL and IRS in assessing whether an employer-sponsored health and welfare plan is being operated and maintained in compliance with the Internal Revenue Code, ERISA and the Affordable Care Act. Most notably, the revisions would limit the reporting exemption for small health and welfare plans, and require employers to disclose significantly more information about their plans in a new Schedule J (Group Health Plan Information) to the Form 5500.
Proposed changes limit exemption for small health and welfare plan reporting
Under the existing reporting regulations, employer-sponsored group health plans with fewer than 100 participants that are fully-insured, self-insured or a combination of insured and self-insured, are not required to file a Form 5500. The proposed changes would eliminate this small plan exception and would require all employer-sponsored group health plans that are subject to ERISA (including grandfathered and retiree plans) to file a Form 5500, regardless of a plan’s size or funding.
The DOL’s executive summary on the proposed regulations states that this change will improve the DOL’s effective development and enforcement of health and welfare plan regulations, as well as the DOL’s ability to educate plan administrators regarding compliance. The new reporting rules will also provide the DOL with data needed for congressionally-mandated reports on group health plans. Under the proposed rules, the existing financial reporting exemptions for health and welfare plans on Schedule C (Service Provider Information), G (Financial Transaction Schedules) and H (Financial Information) will continue to apply. Small, fully-insured plans would have a new limited exemption and would only be required to complete basic participation, coverage, insurance company and benefit information.
Changes to form 5500-SF eligibility
Currently, a welfare plan with fewer than 100 participants, including a plan that provides group health benefits, may file the Form 5500-SF if it is not exempt from the reporting requirements and otherwise eligible. Under the proposed regulations, welfare plans that provide group health benefits and have fewer than 100 participants would no longer be permitted to use the Form 5500-SF. For example, under the proposed rules, a plan funded through a trust with fewer than 100 participants would be required to complete the Form 5500 and Schedule H and Schedule C, if applicable. Welfare plans that do not provide group health benefits, have fewer than 100 participants, and are not otherwise exempt from the reporting requirements would still be able to use the Form 5500-SF.
Proposed changes require disclosure of significantly more plan information
The proposed revisions would also add a new Schedule J (Group Health Plan Information) to the Form 5500. Schedule J would require group health plans to report detailed information about plan operations and compliance with both ERISA and the ACA. For example, plans would be required to disclose, among other things:
- The number of participants and beneficiaries covered under the plan at the end of the plan year.
- The number of individuals offered and receiving Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage.
- Whether the plan offers coverage for employees, spouses, children, and/or retirees.
- The type of group health benefits offered under the plan, i.e., medical/surgical, pharmacy, prescription drug, mental health/substance use disorder, wellness program, preventive care, vision, dental, etc.
- The nature of the plan’s funding and benefit arrangement, and information regarding participant and/or employer contributions.
- Whether any benefit packages offered under the plan are claiming grandfathered status, and whether the plan includes a high deductible health plan, a health flexible spending account, or a health reimbursement arrangement.
- Information regarding rebates, refunds or reimbursements from service providers.
- Stop-loss coverage premiums, information on the attachment points of coverage, individual and/or aggregate claims limits.
- Whether the plan’s summary plan description (SPD), summaries of material modifications (SMM) and summaries of benefits and coverage (SBC) comply with applicable content requirements.
- Information regarding the plan’s compliance with applicable Federal laws, including, for example, the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Genetic Information Nondiscrimination Act of 2008 (GINA), the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) and ACA.
- Detailed claims payment data, including information regarding how many benefit claims were submitted, appealed, approved and denied during the plan year, as well as the total dollar amount of claims paid during the plan year.
The DOL has generally requested comments on the new proposed reporting requirements for group health plans and has specifically requested comments on several of the proposed disclosures listed above, including the costs and feasibility of collecting COBRA coverage information and the methodology and reasonableness of collecting information on denied claims.
Next steps
The proposed revisions to Form 5500 are complex and will likely be subject to a number of changes in response to comments received by the DOL. It is clear, however, that future Form 5500 reporting obligations will require more data, more resources and be subject to increased scrutiny by Federal agencies. Employer sponsors of group health plans should begin to evaluate plan documentation and the potential new disclosures required by Schedule J to ensure that each plan sponsor will be in a position to access such information and adequately communicate the new reporting requirements.
See the original Article Posted on EmployeeBenefitAdvisor.com here.
Source:
Urwitz, J.K., Engle, S., Mardy, M. (2016, August 04). Form 5500 changes could increase obligations for plan sponsors [Web log post]. Retrieved from https://www.employeebenefitadviser.com/opinion/form-5500-changes-could-increase-obligations-for-plan-sponsors
Civil Penalties Adjusted with Interim Final Rule for ERISA Violations
Released by the United States Department of Labor through The Federal Register on July 1, 2016.
Effective August 1, 2016, the amounts for civil penalties will be adjusted as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.
- The maximum penalty for failure/refusal to properly file a plan annual report (Form 5500) increased from $1,100 per day to $2,063 per day the Form 5500 is late.
- The maximum penalty for failure to provide a Summary of Benefits Coverage under the Public Health Services Act increased from $1,000 per failure to $1,087 per failure.
- The maximum penalty for failure to provide an automatic contribution arrangement notice under ERISA increased from $1,000 per day to $1,632 per day.
- The penalty for providing required CHIP notices under ERISA is increased from $100 per day to $110 per day
- The maximum penalty for failure of a multiple employer welfare arrangement (MEWA) to file a report required by regulations issued under ERISA increased from $1,100 per day to $1,502 per day.
- The maximum penalty for failure to furnish reports (e.g., pension benefit statements) to former participants and beneficiaries or maintain records increased from $11 per employee to $28 per employee.
- The maximum penalty for failure to comply with ERISA requirements relating to genetic information increased from $100 per day to $110 per day.
To read the full release from The Federal Register, click here.
U.S. Department of Labor Proposes Improvements to Form 5500
Released by the United States Department of Labor on July 11, 2016.
Form 5500 affects us all and the Department of Labor is looking for your input on the proposed revisions to the form. Below you will find the proposed revisions and some details about them.
The Form 5500 is the primary source of information about the operations, funding and investments of private-sector, employment-based pension and welfare benefit plans in the U.S. There are an estimated 2.3 million health plans, a similar number of other welfare plans and nearly 681,000 pension plans. Covering roughly 143 million private-sector workers, retirees and dependents, these plans have an estimated $8.7 trillion in assets.
The proposed revisions are intended to:
- Modernize the financial statements and investment information filed about employee benefit plans.
- Update the reporting requirements for service provider fee and expense information.
- Enhance accessibility and usability of data filed on the forms.
- Require reporting by all group health plans covered by Title I of ERISA.
- Improve compliance under ERISA and the Internal Revenue Code through new questions regarding plan operations, service provider relationships, and financial management of the plan.
The proposed regulations also would make improvements to the certification requirements for the limited scope audit requirements under 29 CFR 2520.103-8, and allow group health plans to use the Form 5500 to satisfy certain reporting requirements in the Affordable Care Act. The proposed changes to the DOL regulations are also needed to implement the form revisions.
“The proposed form changes and related regulatory amendments are important steps toward improving this critical enforcement, research and public disclosure tool,” said Assistant Secretary for the Employee Benefits Security Administration Phyllis C. Borzi. “The 5500 is in serious need of updates to continue to keep pace with changing conditions in the employee benefit plan and financial market sectors. We must also remedy the form’s current gaps in collecting data from ERISA group health plans.”
To read the full article from the Department of Labor, click here.
How to Avoid Penalties Under the Affordable Care Act
Original Post from SHRM.org
By: Lisa Nagele-Piazza
2016 is expected to be the most expensive year for businesses complying with the Affordable Care Act (ACA), said David Lindgren, senior manager of compliance and public affairs for Flexible Benefit Service Corporation, a benefit administrator headquartered in Rosemont, Ill.
It’s the first year for dealing with ACA reporting, which many employers will have to complete by the end of June, Lindgren said during a concurrent session at the Society for Human Resource Management 2016 Annual Conference & Exposition.
There are more than 30,000 pages of guidance about the law, but Lindgren said the ACA is fairly easy to comprehend. “Of course, many people would disagree with me,” he noted.
“It’s not necessarily easy to comply with the ACA, and it’s not financially inexpensive, but most of the rules aren’t overly complicated,” he said.
The federal agencies that regulate the ACA have said they intend to monitor all businesses for compliance. This may not be realistic, but employers should keep in mind that more auditing can be expected.
Lindgren identified 30 penalties associated with noncompliance and provided insight on how to avoid them.
Employers can choose to pay the penalties for noncompliance, but steep fines are often attached, he said. For example, market reform violations carry a penalty of $100 per participant per day, up to $500,000 for each violation.
Employees Must Receive Notices
Some noteworthy penalties to avoid are those associated with the failure to provide required notices to plan participants, including a written notice of patient protections.
Lindgren said sometimes employers aren’t clear about who has been designated to provide this notice. “A lot of times the insurance company thinks the employer provided it and the employer thinks the insurance company did,” he said. “So it’s important to double check who is in fact giving the notice.”
Participants must also be provided with a summary of benefits and coverage in a standardized format. Lindgren likened this format to a nutrition label on a can of soup.
A participant should be able to easily compare the benefits to other plans, such as a spouse’s plan, just as the nutrition facts for two cans of soup can be easily compared.
There is a standardized template for the summary of benefits and coverage on the Department of Labor website.
The requirement to provide a summary of benefits and coverage applies to medical plans, but not to dental or vision plans.
The summary should be distributed at the time of open enrollment and special enrollments related to qualifying events, as well as at the request of participants and when a material modification has been made to the plan.
Although there is no penalty attached for noncompliance, employers must also provide written notice about the health insurance marketplace to new hires within 14 days of their start date.
This applies even for organizations that don’t offer benefits and even to those employees who aren’t eligible for benefits, Lindgren said.
There are some exceptions. For example, if an employer isn’t subject to the Fair Labor Standards Act, then it doesn’t have to provide the marketplace notice.
Exceptions for Grandfathered Plans
Grandfathered plans aren’t subject to some of the requirements under the ACA. This includes plans purchased on or before March 23, 2010, that haven’t made certain material changes.
Lindgren noted that employers with grandfathered plans must provide written notice to participants notifying them that it is a grandfathered plan and describing what that means for participants.
If participants aren’t provided this information, the plan will lose its grandfathered status, Lindgren said.
HR Takes the Lead
Benefits compliance isn’t just a human resources issue anymore, but HR often takes the lead in compliance efforts, according to Lindgren.
However, other departments, such as finance, legal and information technology, are increasingly getting more involved.