Preview of August Compliance Guide: Annual Enrollment
With growing regulatory oversight of employer-sponsored benefits, annual enrollment is an increasingly complex endeavor. Not only are employers faced with ensuring that benefits offered meet certain standards under the Patient Protection and Affordable Care Act (“PPACA”), but also with meeting specific notice requirements under a variety of employee benefits laws. If you are committed to becoming a destination employer, you must keep pace with evolving legislative and regulatory initiatives that may pose risks to meeting cost targets, developing strategic benefits and compensation programs, and attracting and retaining top talent. As a trusted advisor, Arthur J. Gallagher & Co. will help you navigate the ever-changing landscape of employee benefits compliance issues. Check out the often overlooked, but critical compliance action steps noted below as you traverse through annual enrollment.
1. Take steps in the right direction with online enrollment.
Increasingly, employers use online enrollment to allow plan participants to make annual enrollment elections. Using electronic media to make elections generally invokes cafeteria plan regulations. Fortunately, the 2007 proposed cafeteria plan regulations specifically permit use of electronic media to make cafeteria plan elections, and invoke the IRS safe harbor provisions regarding the use of electronic media by employee benefit plans for cafeteria plan elections and election changes. Under those regulations, a participant must be effectively able to access the electronic system used to make the election. The system must (a) be reasonably designed to preclude any other individual from making the election (i.e., meet authentication requirements); (b) provide the participant with a reasonable opportunity to review, confirm, modify, or rescind the terms of the election before the election is effective (i.e., opportunity to review elections before finalizing); and (c) provide the participant with a confirmation of the effect of the election, either through a written paper document or through an electronic medium, within a reasonable time after the election is made (i.e., confirmation of the action). Does your online enrollment system meet the IRS standards for use of electronic media for cafeteria plan elections?
2. Pack the right gear for annual Form 1095 reporting.
Annual enrollment can also be used as an opportunity to collect data needed for Form 1095 reporting. If you have self-insured medical coverage and are responsible for Section 6055 reporting, you’ll need to capture the Social Security numbers for spouses and dependents. Annual enrollment forms can be used to capture that data. In addition, annual enrollment materials can be documented to show that specific offers of coverage were made to applicable full-time employees (as defined by PPACA). Are you using your annual enrollment process to ensure that you have necessary information for annual PPACA reporting?
3. Lace up with waivers.
Not only can annual enrollment be used to capture information regarding elections made by employees, it can also be used to obtain proof that employees waived coverage. For example, your organization can require all eligible employees to either waive coverage or be enrolled in default coverage. That allows you to obtain written waivers of coverage, which can be important if you receive a Section 1411 Certification from the Marketplace (indicating that an employee was eligible for a subsidy to purchase coverage in the Marketplace). This demonstrates that an employee was offered affordable coverage with minimum value sufficient to avoid Employer Shared Responsibility penalties under PPACA. Are you using annual enrollment to obtain written waivers of coverage?
4. Position yourself with the right recipients.
Annual enrollment materials, particularly if those materials are used as summaries of material modification (“SMMs”), should be distributed to currently enrolled participants, individuals who are on FMLA (and other leaves of absence), and individuals known as “alternate recipients.” Individuals on FMLA leave have the same rights to changes in health benefits that other members do. So, it is important to permit them to change their elections in the same manner as other employees. Alternate recipients are children who are enrolled in health coverage under a Qualified Medical Child Support Order (“QMCSO”). Typically, information that must be provided to an alternate recipient will either be sent to a custodial parent or guardian. Has your organization taken steps to ensure that annual enrollment materials are provided to all of the correct recipients, including those on FMLA leave and alternate recipients?
5. Take a few shortcuts on materials for COBRA Qualified Beneficiaries.
COBRA Qualified Beneficiaries are entitled to receive enrollment materials, and may make changes in benefits in the same manner as active participants. However, you should be careful to modify enrollment materials for COBRA Qualified Beneficiaries so you don’t create confusion from providing information on benefits that are not part of COBRA continuation coverage, such as life insurance and other non-health benefits. Do you have annual enrollment materials customized for COBRA Qualified Beneficiaries?
Compliance is a journey, not a destination. As a trusted advisor, Arthur J. Gallagher & Co. has developed this Compliance Guide series to help you map a path through employee benefits compliance issues as part of an overall compliance plan. Employers should carefully evaluate their health and welfare plans to determine if they are in compliance with both federal and state law.
This is a preview of the August issue of the Compliance Guide. If you would like the full version of the Compliance Guide or would like additional information on how Gallagher constantly monitors laws and regulations impacting employee benefits and supports employers in their compliance efforts, please contact your Gallagher Benefit Services representative or click here to Contact Us via ajg.com.
The intent of this analysis is to provide you with general information. It does not necessarily fully address all your organization’s specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues should be addressed by your organization’s general counsel or an attorney who specializes in this practice area.