From fostering a workplace culture centered on supporting the physical, emotional, career and financial wellbeing of employees to ensuring that benefit programs are compliant with local, state and federal requirements, effectively protecting the wellbeing of your employees connects directly to protecting the wellbeing of your organization overall. Compliance Connections delivers monthly, actionable guidance designed to help you manage and optimize the connections between the compliance of your benefits and human resources programs to overall organizational wellbeing. Below, we share action items for communications, notice obligations, and plan changes during annual enrollment.
Follow through on disclosure requirements. One of the primary purposes of annual enrollment materials is to communicate changes and plan information to plan participants. Thus, annual enrollment provides an opportunity to meet disclosure requirements. For example, if annual enrollment materials include ERISA language, they can meet the criteria needed for Summaries of Material Modification (SMMs) required to be provided to plan participants for plans subject to ERISA when a plan document has been amended. For example, if enrollment materials include a section on "What's Changing for the New Plan Year" or "What's New," you could add a box at the top of that section to indicate that the materials constitute an SMM. The box could contain language such as: "The materials below constitute a Summary of Material Modification to the Summary Plan Description (SPD) for our Plan. Please keep a copy of this SMM with the SPD previously provided to you." How can your plan use your annual enrollment materials to fulfill ERISA disclosure requirements for an SMM?
Remind employees of the "regular" Flexible Spending Account rules. IRS regulatory guidance and federal legislation provided transitional relief to employees who may have been unable to use their Flexible Spending Accounts (FSAs) because of the pandemic. The IRS liberalized the rules to permit certain mid-year election changes without a change in status for calendar year 2020 and for plan years that end in 2021. Grace periods may be extended from 2 months and 15 days to 12 months for 2020 and 2021 plan years. Health FSAs may permit an unlimited carryover for the 2020 and 2021 plan years. Dependent Care Assistance Plan FSAs (DCAPs) may include a carryover provision for 2020 and 2021 plan years. Finally, the IRS rules include a temporary increase in the maximum DCAP age for children from 13 to 14 for the plan year in which the end of the regular enrollment period was on or before January 31, 2020. In addition to regulatory relief, Congress increased the dollar maximum for the DCAP from $5,000 to $10,500 for calendar year 2021. However, these new provisions are only temporary and the rules will revert to pre-pandemic status in 2022. Employers who adopt any of these changes may want to use annual enrollment to re-communicate to employees the "regular" rules that will resume next year. How will you communicate to employees during your upcoming annual enrollment period that these new, more liberal rules are going away?
Provide applicable notices. Various federal (and sometimes state) laws have mandatory plan disclosure requirements. Some of the required disclosures must be included with annual enrollment materials, while others may be included. For example, a Summary of Benefits and Coverage (SBC) must be provided no later than the first day of an individual's enrollment opportunity - for example, no later than the first day of annual enrollment. If a plan uses an evergreen election, the SBC must be provided 30 days prior to start date of the new plan year. (Note: Plans that do not provide an annual enrollment opportunity may risk penalties under the Patient Protection and Affordable Care Act's (ACA's) Employer Shared Responsibility requirement.) For participants and beneficiaries who are already enrolled in coverage, it is only necessary to provide an SBC for the coverage in which they are enrolled. Unenrolled individuals must receive SBCs for each plan for which they are eligible. In addition, employers must provide annual notices that contain information about the Children's Health Insurance Plan, Women's Health and Cancer Rights Act, Medicare Part D, and the availability of the HIPAA Notice of Privacy Practices. Employers with wellness plans may be required to distribute additional notices such as an ADA or GINA notice. In addition, some notices may have changes in content and need to be updated. Many employers include these required notices with their annual enrollment materials. What process does your plan undergo to ensure appropriate delivery of mandatory disclosures during annual enrollment?
Don't forget your HIPAA Notice reminder. In addition to ERISA and ACA-related notices, employer-sponsored health plans also have HIPAA Privacy notice obligations. Under the HIPAA Privacy Rule, employer-sponsored health plans must notify individuals at least every three years that a Notice of Privacy Practices is available and explain how to obtain the notice. Based upon an FAQ from the Department of Health and Human Services (HHS), this requirement can be fulfilled by: (i) sending a copy of the plan's Notice; (ii) mailing a reminder that the Notice is available, with information on how to obtain a copy; or (iii) including in a plan-produced newsletter or other publication information about the availability of the Notice of Privacy Practices and how to obtain a copy. Annual enrollment materials can thus serve as the means under the third option to inform individuals that a health plan has a Notice of Privacy Practices and how to obtain a copy, which generally means directing individuals to the location where the Notice is posted electronically and providing information on how to contact the plan's Privacy Officer. As a best practice, many plans include the triennial notice every year to avoid overlooking it in an applicable year. How can your plan use annual enrollment materials to meet its HIPAA Notice of Privacy Practices triennial reminder?
Consider any changes to annual enrollment material for your non-active employee population. For many in human resources (HR), annual enrollment can be an extremely chaotic time with a lot of activity required in a very short time frame. With a flurry of activity centered around active employees, non-active or non-employee groups - such as individuals on leave or retirees - are sometimes overlooked. Preparing enrollment material for such groups requires special consideration due to differing payment options, delivery, and content requirements. For example, the annual enrollment material for retiree and surviving spouse groups will depend largely on whether an employer sponsors a combined active and retiree plan. Generally, there are a number of federal laws that apply only to plans that cover more than one current employee. For example, a retiree-only plan is not subject to HIPAA portability requirements, including HIPAA special enrollment rights, because it applies only to plans with current employees. Additionally, retiree-only plans are exempt from many ACA requirements, such as dollar limits on essential health benefits, pre-existing condition limitations and exclusions, and cost-sharing provisions. But, a plan that covers both active employees and retirees would be required to comply with these requirements with respect to both current employees and retirees. The scope of annual enrollment material for COBRA Qualified Beneficiaries may be similar to active employees in terms of benefits, but changes might include FMLA provisions, removal of FSA and DCAP enrollment and contribution language, cafeteria plan mid-year election changes, and pre-tax salary reduction agreements. Other populations also deserve special attention.What annual enrollment changes does your organization need to make for your non-active employee and non-employee populations?
This is a preview edition of Compliance Connections, a monthly publication produced by Gallagher's Compliance Consulting Practice. For five more action steps, contact your Gallagher representative or visit our Compliance Resources page to subscribe and receive the full version of this publication each month.
Compliance is a series of actions, not a final destination. As a trusted advisor, Gallagher has developed this Compliance Connections series to help you pursue a path through employee benefits compliance issues as part of an overall continuing compliance plan. Plan sponsors should carefully evaluate their health and welfare plans to determine if they are in compliance with both federal and state law. If you have any questions about one or more of the compliance requirements listed above, or would like additional information on how Gallagher constantly monitors laws and regulations impacting employee benefits in order to support plan sponsors in their compliance efforts, please contact your Gallagher representative.Disclaimer
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.