What about older, more established regulatory requirements such as COBRA and ERISA?
Most employers would benefit from checking their plans to make sure that these basic requirements have been attended to properly.
In the case of ERISA, one of the most common problems is one of the oldest — the establishment of proper plan documents and summary plan descriptions. Any insured plans still rely on policies and certificates of coverage from their insurers to serve as the ERISA plan documents, when this is most often not sufficient to satisfy the regulations. Specific language and disclosures are required by law for all such documents, and the carrier documents often do not include such language. ‘Wrap documents’ may convert insurance contracts into ERISA documents, but many employers still have not taken proper measures to make sure this has been accomplished.
Often, employers will assume that an outside COBRA administrator will take care of everything. But, even if an employer has outsourced COBRA administration to a professional firm, the employer still has ultimate responsibility for execution of these tasks.
Further, even major national COBRA administration firms sometimes do nothing to cover the requirements of COBRA-like regulations sponsored by states. One example is Minnesota’s requirement for continuation of group life insurance benefits. Many COBRA administrators do not tend to this requirement, or requirements like it, leaving employers with the responsibility of sending required notifications, as well as collection of premiums and reporting to insurers. And employers are often unaware of such requirements.
Are there more obscure requirements that are frequently passed over?
Many employers with employee populations in San Francisco established HRAs to hold the required funding for the SFHCO. This is an approved method of funding the benefit; however, it may run afoul of health care reform, which requires specific annual limits for benefits in general. Freestanding HRAs are subject to these requirements and are not excluded like FSAs and HSAs.
Regulators have advised that such plans need a formal waiver from the annual limits requirements to remain in compliance with health care reform. Special application must be made to Health and Human Services in order to gain such a waiver.
What are the penalties for failing to meet these compliance requirements?
With governments seeking revenue wherever they can find it, we see enforcement efforts and potential fines as becoming more prevalent. In a worst-case scenario, noncompliance can bring the loss of a plan’s tax-favored status, both for employer contributions and for those of employees. Other penalties vary by rule, but, for example, the new health care reform discrimination rules carry a penalty of $100 per employee per day, which can become very expensive, very quickly.
Jeff Morgan is executive vice president of USI. Reach him at [email protected].
