The following employer checklist applied to the administration of health and welfare benefit plans and is provided for informational purposes only. The information included in this checklist may change over time and should not be considered legal advice. Berends Hendricks Stuit Insurance Agency is not issuing legal advice by providing this information and is not liable to you for any penalties, damages or other amounts relating to your interpretation and use of this information. Berends Hendricks Stuit Insurance Agency recommends consultation with your own legal counsel regarding the employer’s ongoing administrative duties in connect with its health and welfare benefits plans.
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Certificates of Creditable Coverage
Certificates of Credible Coverage do not have to be issued for plans covering only one employee. For all other employers offering health insurance plan coverage, the plan must issue a Certificate of Creditable Coverage to individuals upon ceasing to be eligible for employer group health insurance coverage. Additional copies of the Certificate must also be provided upon the request of or on the behalf of the individual at any time within 24 months after the date the individual loses coverage under the plan.
COBRA - Consolidated Omnibus Budget Reconciliation Act
Generally, if the employer has at least 20 employees, it is subject to the federal law known as COBRA and must provide continuation coverage to qualified beneficiaries who experience a qualifying event. The plan must provide a COBRA notice to all employees and dependents when they initially become eligible to participate. The employer should either develop procedures to comply with COBRA or alternatively, should retain the services of a third party to assist in COBRA administration.
Conversion Privileges
State law may require that individuals be offered a conversion policy upon termination of coverage. This coverage would follow COBRA continuation coverage in the case of a group health insurance benefit terminating. Participants should be notified of any conversion opportunities.
FMLA - Family Medical Leave Act
During any calendar year when the employer employs 50 or more employees (including part-time employees) each working day during 20 or more calendar weeks in the current or preceding calendar year, the employer is subject to the FMLA. In order to comply with FMLA the employer must adopt a policy in which it articulates it’s rules concerning the granting of leaves of absence for family or medical reasons, within the parameters of FMLA. One of the FMLA’s requirements is to continue an employee’s health coverage during the leave. However, the employee may be required to continue to pay the same cost for the coverage as actively working employees. If the employee drops converge during the leave, the employee must be reinstated upon his or her return with no pre-existing condition exclusion or limitation imposed against the individual.
Form 5500
The Form 5500 Annual Return/Report is used to report information concerning employee benefit plans to the International Revenue Service (IRS) and Department of Labor (DOL). Generally, employers with less than 100 participant employees in any one of their sponsored health and welfare plans do not have to file a Form 5500. If there are 100 or more participant employees enrolled in any one of the plans (for any health and welfare plan) at the beginning of the plan year, a Form 5500 must be filed for each plan within seven months after the close of the plan year. The IRS and the DOL have authority to assess penalties for late filing. However, it should be noted that a group insurance plan sponsored by a church employer or a government employer is exempt from the Form 5500 filing requirement.
HIPAA - Health Insurance Portability and Accountability Act
The Health Insurance Portability and Accountability Act (HIPAA) imposes a variety of requirements on employer group health plans. These requirements include:
Restricting a group health plan’s ability to exclude or limit coverage for pre-existing conditions.
Requiring any pre-existing condition exclusion or limitation period to be offset by a participant’s coverage under a prior plan.
Requiring special enrollment periods to allow immediate entry into a group health plan where there has been a loss of other coverage or the addition of a new dependent.
Prohibiting discrimination in eligibility due to any health status-related factor.
Requiring claims, enrollment, premium payment, precertification, coordination of benefits and other transactions to be conducted in a standardized format when performed electronically. These requirements are known as the EDI (Electronic Data Interchange) rules and are generally effect in the fall of 2003.
Requiring health plans to ensure, as much as possible, that personal health information regarding participants is not used by employers for employment-related decisions. These requirements are known as the HIPAA privacy rules and are generally effective in April 2003 (April 2004 for smaller group health plans defined as plans with annual premiums of $5 million or less).
MHPA - Mental Health Parity Act
The MHPA restricts a group health plan for imposing annual or lifetime limits that are more restrictive for mental health benefits than other medical benefits. The MHPA applied to most group health plans with more than 50 employees. The MHPA does not apply to group health plans sponsored by employers with fewer than 51 employees. The MPHA expired and has been temporarily reinstated. Permanent legislation is expected to be enacted which will impose the same or more restrictive requirements.
QMCSO - Qualified Medical Child Support Order
Qualified Medical Child Support Orders (QMCSO’s) are frequently issued by courts and state agencies where a child is born out of wedlock and the father does not voluntarily seek to add to add the child to his employer-provided group health coverage. Generally, all group health plans are required to enroll a child for whom an employee is required to provide coverage pursuant to a QMCSO. Employers are required to maintain QMCSO procedures to determine whether a submitted order constitutes a QMCSO. A copy of the procedures must be made available to requesting participants without charge.
Section 125
If employees are required to pay all or part of the premium for any of the full-insured benefits and the payments are made on a pre-tax basis, a Section 125 Plan must be maintained. If such a plan is not maintained, it will create adverse tax consequences for employees. A Section 125 Plan must also be maintained if the employer pays additional compensation to employees for waiving group health benefits.
SAR - Summary Annual Report
Generally, employers with less than 100 participants employees in any one of their sponsored health and welfare plans do not have to provide an SAR to participants. If there are 100 or more participants in the sponsored health and welfare plans at the beginning of the play year, an SAR must be provided to each participant within nine months after the close of the plan year. The SAR is a summary document outlining the financial condition of the Plan.
SMM - Summary of Material Modifications
If an important change to the plan is to be made in the future, participants must be provided with an SMM to inform them of the change. This document generally must be supplied no later than seven months after the end of the plan year in which the change was made. However, in the case of a change which is a material reduction in covered services or benefits under a group health plan, notice must be provided no later than 60 days after the date of the change was adopted. Examples of material reduction include (but are not limited to) an elimination or reduction in benefits, an increase in deductibles or copays, a reduction in an HMO’s service area and the addition of preauthorization requirements.
SPD - Summary Plan Description
A SPD must be prepared and distributed by employers to participants for al employer sponsored group health and welfare plans (health, life, disability and other welfare plans) within 120 days after the Plan is established. Subsequently eligibility individuals must be provided a copy of the SPD no later than 90 days after becoming a participant.
New regulations have been issued with increase the information required to be included in an SPD. The Department of Labor (DOL) required that a new SPD be prepared and distributed to participants every five years if any change or amendment is made to a Plan and every ten years if there are not amendments made.
WHCRA - Women’s Health and Cancer Rights Act
The Women’s Health and Cancer Rights Act (WHCRA) is a federal law that provides protections to patients who choose to have breast reconstruction in connection with a mastectomy. Most employers will be required to comply with WHCRA as all group health plans that offer coverage with respect to a mastectomy are required to provide benefits for certain expenses relating to a mastectomy. Employers must provide a notice summarizing the coverage upon enrollment of the participant and on an annual basis thereafter.
Helpful Website Resources for Employers/Administrators
www.dol.gov - The U.S. Department of Labor website provided valuable information for employers organized by topic and including the current employment statistics.
www.dol.gov/ebsa - The Department of Labor’s Employee Benefits Security Administration website provides guidance, reference materials, forms and publications for employer’s use.
www.dol.gov/elaws - An advisory website provided by the Department of Labor that includes interactive tools and information about the federal employment laws.
www.business.gov - Sponsored by the Small Business Administration, the U.S. Business Advisor website provides access to information for small businesses including tax, regulation and work place issues.
