Employers offering employee benefits to their employees are required to meet virtually innumerable legal requirements under the Employee Retirement and Income Security Act (“ERISA”), the Patient Protection and Affordable Care Act (“ACA”), the Internal Revenue Code, as well as dozens of other federal and state laws related to benefits. These requirements fall into three categories of compliance:
Most employers with a competent insurance broker/consultant are in good shape with respect to coverage requirements. However, employers who rely solely on their broker for compliance rarely meet the operational and document requirements for benefit plans. The penalties for document and operational noncompliance range from up to $110 per day to $1,100 per day for each failure. In addition, there are no statutes of limitation on certain requirements. This is serious stuff.
In the past, the U.S. Department of Labor and IRS were more concerned with whether or not retirement and pension plans were compliant with benefit laws. However, that emphasis has shifted dramatically, due in part to the ACA. In the last few years, the DOL and IRS have hired hundreds of agents and investigators to enforce the ACA and ERISA rules with respect to health and welfare plans. Many noncompliant plans have been operating under the radar for years without penalties. Going forward, those same plans will be the target of compliance audits. The consequences could be significant.
Plan Document Requirements
When the DOL audits an employer’s health & welfare benefit plans, the first documents required from the employer are the:
Ironically, the first documents requested are the most likely to fall short of the compliance requirements because most employers are not familiar with the document content requirements.
If the plan documents are not compliant or don’t reflect how the plan is operated, then the employer can be assessed thousands of dollars in penalties. Most employer don’t realize that, under federal law, the employer is responsible for these documents, not their broker or insurance carrier. (Note: Carriers are jointly responsible for the SBC only in certain circumstances.)
Employers should, therefore, consult with their own attorney (and not just take their broker’s word) to make sure these legal documents meet federal requirements.
Plan Operation/Administration Requirements
During an audit, the DOL will also review the plan documents to make sure they accurately reflect how the employer operates the plan. In addition, employers must be able to show that they are operating the plan in compliance with applicable federal and state laws.
As mentioned above, most employers are in good shape on coverage requirements because the plans offered by reputable insurance carrier are, ostensibly, ACA-compliant. For example, coverage requirements include:
But even when an employer satisfies the coverage mandates, several questions and issues can linger. How well do you fare?
So, are you ready?
In many cases, employers who believe they are currently compliant and prepared for the new regulatory rigors on the horizon find, upon closer investigation, that they’re not as prepared as they thought. Addressing gaps in their compliance and putting in place the appropriate policies does not have to be expensive or burdensome. Doing so before there is an issue, complaint, or investigation will always be less frenetic than waiting for problems to surface.
We encourage you to let us help get you on the right track early. Call us and let’s get started.