Authored by Dannae L. Delano
Sep 13, 2017
As we get closer to the vast majority of employers’ open enrollment period for 2018 benefit programs, special attention should be paid to compliance issues. To help you prepare for open enrollment, here are the top 10 changes and updates on some of the rather tumultuous issues:
1. Disability Claims Procedures – New claims procedures apply to disability claims made on or after Jan. 1, 2018. Plan documents must be updated to reflect the new procedures. Amendments may be required for disability plans, wrap plans, and/or retirement plans. The new procedures more closely reflect health plan claims procedures, but without the external review requirements.
2. New SBCs – New Summary of Benefits and Coverage (SBC) rules apply to open enrollment periods after April 1, 2017. SBCs are usually provided by an employer’s insurance carrier or third party administrator, but it is the employers’ responsibility for accuracy in compliance and distribution. Changes include new formatting and content requirements and increased penalties. A new template is available on the DOL website.
3. Controlled Group Issues – All members of an employer’s controlled or affiliated service group are considered a single employer for many benefit purposes. These rules are complicated and any entities with common ownership or overlapping services should revisit the status of the group on an annual basis. Retirement plan testing, multiple employer plan status, ACA compliance, COBRA, benefits eligibility issues, and more can be impacted by this status. If an entity or a group of entities has been involved in any mergers or acquisitions in the last year, controlled or affiliated service group status should also be evaluated.
4. ACA Status – Regardless of President Trump’s campaign promises to “repeal and replace” the ACA, all Republican efforts to effectuate statutory changes have been unsuccessful. The Senate must act this month or changes through the reconciliation process to the bill passed by the House in May can no longer be made. The reconciliation process only requires a 51 vote majority in the Senate. Bills enacted outside of the reconciliation process require a supermajority in the Senate making repeal unlikely. This means that current law requires employers with 50 or more full-time and full-time equivalent employees in 2017 to offer affordable, minimum value health coverage to 95% or more of their full-time employees in 2018 to avoid the penalties imposed by the ACA.
5. Health Care Affordability – The affordability requirement under the ACA mandates employee premiums for employee-only health coverage be 9.56% or less of an employee’s household income. Because most employers have no means of ascertaining an employee’s household income, there are several safe harbors that may be utilized to achieve compliance. The federal poverty line safe harbor is the easiest to administer by charging employees no more than $98 per month for employee-only health coverage. Employers who wish to pass more of the cost on to the employee must deal with the much heavier administrative burden of the W-2 and hourly rate safe harbors to do so.
6. Paid Sick Leave –Currently forty-five different state and local jurisdictions have passed paid sick leave laws, and more are in the process. Five states—California, New Jersey, New York, Rhode Island and Washington—as well as D.C. have passed paid family leave laws that either require or permit employee payroll deduction and in some cases complex coordination with FMLA and/or other paid time off. Federal Contractor paid leave went into effect Jan. 1, 2017, but enforcement has been suspended by the Trump Administration. Employers should consider the extent paid sick leave needs to be provided prior to open enrollment to adjust other benefit programs accordingly.
7. HIPAA Compliance – The HIPAA compliance audits are expanding and increasing each year and apply in the same manner to self-funded group health plans (including health flexible spending accounts) as to large hospital systems. Plans need to ensure HIPAA compliance which includes a regular review of how protected health information is utilized by the plan, including electronic handling, written HIPAA policies and procedures, and updated Business Associate Agreements with all business associates. With the fines being levied against noncompliant group health plans in the millions of dollars, all employers with self-funded group health plans need to ensure compliance before receiving a notice of audit.
8. Wellness Regulations – The new EEOC rules for ADA and GINA compliance for wellness programs were effective for 2017 benefits. The new rules still allow incentives to be offered for an employee or dependent to submit to a medical examination (biometric screening) or respond to a disability-related inquiry (ADA), and an employee’s spouse to participate in a program that requires disclosure of the spouse’s manifestation of disease or disorder (GINA), but there are restrictions on incentives that may be provided and notice/authorization requirements that apply. Nevertheless, a federal district court ruled in late August that the new rules are invalid making the status of the formerly settled rules uncertain.
9. State Sponsored Retirement Plans – Nine different states have passed legislation to create individual retirement plans. Illinois, Oregon, and California have Roth IRA programs with specific contribution and enrollment criteria. These programs could still be challenged as preempted by ERISA. Employers who sponsor a retirement plan are generally exempt from participation.
10. No Salary History Inquiries – Delaware, Massachusetts, Oregon, and a few major cities have all passed legislation limiting salary history inquiries until a certain stage of the recruitment process and prohibiting using salary history information in employment decisions. Several other states, including Illinois, have similar bills in progress. The Governor of Illinois vetoed the No Salary History bill in late August, but the Illinois legislature can likely override the veto if it so desires.
If you have any questions about these compliance issues or any other employee benefits matter, please do not hesitate to contact Dannae Delano or any of the members of Lowenbaum Law’s benefits team.