Considerations for trending benefits
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 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.
Each time an employer considers offering a new benefit to employees, the plan sponsor should take the extra step of determining the compliance requirements under federal law. Missing these important considerations can turn a new benefit into a compliance risk.
To help ease confusion, this edition provides important questions to ask and practical steps to comply with various federal laws.
1. Is the program subject to ERISA?
If an employer-sponsored benefit is subject to the Employee Retirement Income Security Act of 1974 (ERISA), the employer is responsible for meeting certain reporting and disclosure requirements. Thus, an important starting point is to determine whether the program is subject to ERISA. In general, the benefit will be subject to ERISA if 1) the employer is subject to ERISA, and 2) the benefit is one regulated by ERISA. ERISA applies to private employers, including for-profit and non-profit employers (e.g., corporations, partnerships, sole proprietorships), but doesn't apply to governmental employers or church plans that haven't elected to be subject to ERISA. If the employer is subject to ERISA, the next step is determining whether ERISA applies to the particular program. ERISA specifies the benefits to which it applies, including medical, surgical, or hospital benefits; sickness, accident, disability, death, or unemployment benefits (e.g., LTD, ADD, life, certain severance benefits); and other less common benefits like funded vacation, training, and scholarship programs, some day care benefits, and some prepaid legal benefits. If a benefit is subject to ERISA, ERISA compliance can be accomplished either by making the benefit a feature of the employer's major medical plan or by creating a stand-alone plan. Whether the benefit is combined with major medical or stand-alone can be a complicated decision and should be discussed with experienced advisors. If the program is subject to ERISA, how will you meet ERISA compliance requirements?
2. Is the program a voluntary benefit?
For employers subject to its rules, ERISA requires certain reporting and disclosures, including maintaining a written plan document, distributing a summary plan description (SPD), and complying with Form 5500 filing obligations. While those requirements aren't necessarily onerous, compliance does add complication. Employers who are subject to ERISA may want to avoid compliance where possible by relying on an exception to ERISA, one of which is the voluntary benefit safe harbor. For benefits that fall within this safe harbor, ERISA compliance isn't required. To fall within this safe harbor, the benefit must meet the following conditions: employee participation is completely voluntary; the employer doesn't contribute to the plan; the employer's involvement is limited to collecting premiums and distributing them to the insurer; the employer receives only reasonable compensation for administrative costs; and the employer doesn't endorse the plan. As a note of caution, frequently, an employer may lose the benefit of the safe harbor because of its involvement with the benefit. For example, the employer may advertise the benefit in its annual enrollment materials as a company benefit. If the safe harbor cannot be met, the ERISA compliance requirements must be met. If you seek to rely on the voluntary benefit safe harbor, how have you ensured all requirements are satisfied?
3. Does the program provide medical care?
A benefit provides medical care if it provides or pays for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. This includes transportation to receive medical care. Some examples of medical care are health, vision, prescription drug, telemedicine, vaccines and physical therapy. If a benefit provides medical care, it's a group health plan unless the plan is an excepted benefit and, in that case, the simplest method of compliance may be to treat the benefit as a component of the employer's medical plan. This would involve, among other things, restricting eligibility to those enrolled in the medical plan; including information about the benefit in the SPD; communicating that the benefit is part of the medical plan; and offering the benefit to COBRA qualified beneficiaries who elect medical (while also including it in the medical plan COBRA premium). Alternatively, the benefit could be treated as a standalone plan. In that case, compliance would involve complying with the Patient Protection and Affordable Care Act (ACA) preventive care mandate, cost sharing rules, the requirement to provide coverage to an employee's child under age 26, emergency care, transparency, and reporting and disclosure requirements. In addition to ACA compliance, the standalone benefit would also need to comply separately with ERISA, COBRA and HIPAA privacy and security. How have you evaluated the compliance alternatives for your benefits that provide medical care?
4. Is the program an excepted benefit?
Certain employee benefits that provide medical care (i.e., group health plans) may avoid compliance with some federal laws, notably ACA, if they meet the definition of an excepted benefit. Examples of benefits that, if designed correctly, are excepted benefits include limited scope dental and vision, limited purpose flexible spending accounts or health reimbursement arrangements, certain employee assistance programs, and fixed indemnity plans. If the plan provides medical care, but meets the excepted benefit standard, the compliance requirements are reduced. The obligations would still include adopting a plan document and SPD (for ERISA plans), offering COBRA (with a separately calculated COBRA premium), and confirming HIPAA privacy and security compliance with the insurer, and if the employer isn't hands-off, including the benefit in the employer's HIPAA policies. Noticeably absent from these requirements, though, is the ACA preventive care, annual limits, and appeal process requirements. Excepted benefits are exempt from these, which simplifies compliance. Do you have benefits that could fall within the excepted benefit category?
5. Does the employer provide mental health and substance use disorder benefits?
The Mental Health Parity and Addiction Equity Act (MHPAEA) doesn't mandate the coverage of any mental health or substance use disorder (MH/SUD) benefits, but when a plan provides both medical benefits and MH or SUD benefits, MHPAEA requires the plan to provide parity between those benefits. Parity must exist in the plan's annual and lifetime limits, financial requirements (e.g., copays, coinsurance), quantitative treatment limitations (e.g., day or visit limits), and non-quantitative treatment limitations (e.g., pre-certification, medical necessity, experimental/investigational exclusions). Thus, if a new benefit provides additional medical care or MH/SUD benefits, the data from the new plan must be considered in conjunction with the major medical plan. MHPAEA compliance is an area of recently increased scrutiny, so understanding the rules and complying with them is crucial. How have you ensured compliance with MHPAEA for your new and established benefits?
This is a preview edition of Compliance Connections, a publication produced by Gallagher's Compliance Consulting practice. For five more action steps, contact your Gallagher representative or visit our Compliance Resources page to learn more.
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. Employers 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 employers in their compliance efforts, please contact your Gallagher representative.