compliance 101 - sentinel benefits€¦ · compliance 101 presented by: john gallagher, m.s., sphr,...

C ompliance 101

Presented by: John Gallagher, M.S., SPHR, Director of Health & Welfare Compliance Services

Lisa Jones, Esq., CPC, QPA, Retirement Plan Advisor & ERISA Consultant

A crash course in employee benefits rules and regulations

Reporting, Disclosure and Filing Requirements

Paid Family & Medical Leave

Patient Protection & Affordable Care Act

Agenda

Common Retirement Plan Errors

IRS Audits

Fiduciary Lawsuits & DOL Regulation

Massachusetts Paid Family & Medical Leave (MA PFML) Grandfathered Health Plan Notice Summary Plan Description (SPD) Newborns’ and Mother’s Health Protection Act Women’s Health and Cancer Rights Act (“WHCRA”) Enrollment Notice Initial COBRA Notice

New Hire / Upon Eligibility Notices

Children’s Health Insurance Plan (CHIP) Notice Special Enrollment Rights Notice Medicare Part D Creditable (or Non-Creditable) Notice Notice of Exchange (“Marketplace Notice”) Summary of Benefits & Coverage (SBC) Wellness Program: Notice of Availability of Reasonable Alternative Standard

An IRS audit can be randomly generated, caused by a response on the Form 5500 or part of a focused audit.

A DOL benefits advisor may contact the employer due to an employee question or

complaint. If the employer works with the benefits advisor to address their concerns the employer may be able to avoid an audit. If an employer does not respond, if there appears to be a violation that is systematic and widespread, if

the company is in financial distress or criminal activity is suspected chances are you will not be able to avoid an audit.

If an error or potential ERISA violation was on a Form 5500, the DOL may open an

audit on the plan.






audit on the plan.

CHIP Premium Assistance Notice

• Applies to employers providing health coverage to employees residing in any of the 37 states that offer Medicaid or Children's Health Insurance Program (CHIP) premium assistance

• Model Notice: dol.gov/ebsa/pdf/chipmodelnotice.pdf

Children’s Health Insurance Program






audit on the plan.






audit on the plan.

Special Enrol lment Rights Notice

Purpose: To avoid claims for benefits by employees and dependents who may assert they were not informed of special enrollment rights/enrollment deadlines

Required to provide the Notice must to the employee at or before the employee is initially given the opportunity to enroll and during Open Enrollment.

Special Enrollment Rights Events include:

•Loss of coverage under Medicaid or a state Child Health Insurance Plan (CHIP) •Loss of Eligibility under other coverage •Marriage of an employee •Divorce •Birth of a child •Adoption (or placement for adoption) of a child with employee






audit on the plan.






audit on the plan.

Medicare Part D

Purpose of the Notice is to assist Part D eligible employees in determining whether to enroll in a Medicare Part D Plan during the Annual CMS Open Enrollment period (Oct 15 – Dec 7) • Must be distributed:

• Upon eligibility for the plan • Upon a change in the Plan’s

creditable Rx status • Annually, prior to CMS Open

Enrollment • Upon request

• Recommend Distribution to ALL

Employees

Creditable Coverage Disclosure Notice

Notice of Exchange (AKA: Marketplace Notice)

Designed to educate individuals about availability of state health insurance exchanges

• Must be distributed:

• To New Hires within 14 days of hire

• Make certain to use up-to-date version (Expiration date 5-31-2020)

Expiration Date Here

Summary of Benefits & C overage (“SBC”)

• The Summary of Benefits and Coverage (SBC) is a short document that is intended to describe the benefits of health plans in layman’s terms, relying heavily on ‘plain language’ and charts.

• The SBC summarizes the key features of the health plan, such as the covered benefits, cost-sharing provision, and coverage limitations and exceptions.

• Plans must provide SBC with enrollment materials annually

Wel lness Program:

The Health plan must disclose, in all plan materials describing the standard-based wellness program, that reasonable alternative standards are available. Sample Language: “If it is unreasonably difficult due to a medical condition for you to achieve the standards for the reward under this program, or it is medically inadvisable for you to attempt to achieve the standards for the reward under the program, please contact us and we will work with you to develop another way to qualify for the reward.”

Notice of Availability of Reasonable Alternative Standard






audit on the plan.






audit on the plan.

Massachusetts Paid Family & Medical Leave Notice

Grandfathered Health P lan Notice

To maintain status as a grandfathered health plan, a plan or health insurance coverage must include a statement, in any plan materials provided to participants or beneficiaries, describing the benefits provided under the plan, the plan believes it is a grandfathered health plan within the meaning of section 1251 of the Patient Protection and Affordable Care Act and must provide contact information for questions and complaints.

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwijm4bzg5TiAhWid98KHfk9D7MQjRx6BAgBEAU&url=http://exchange.smarttech.com/details.html?id%3Df4515c17-83eb-4dc1-bb04-625c6b3e39cb&psig=AOvVaw00UMbFBC0PH0_-FwoKiBPv&ust=1557683102860241

Grandfathered Health P lan Notice

This Group Health Plan believes this Plan is a “grandfathered health plan” under the Patient Protection and Affordable Care Act (“ACA”). As permitted by the ACA, a grandfathered health plan can preserve certain basic health coverage that was already in effect when that law was enacted. Being a grandfathered health plan means the your plan may not include certain consumer protections of the ACA that apply to other plans, for example, the requirement for the provision of preventive health service without any cost sharing. However, grandfathered health plans must comply with certain other consumer protections in the ACA, for example, the elimination of lifetime limits on benefits. Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered health plan status can be directed to the plan administrator. You may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272

The following model language can be used to satisfy this disclosure requirement:

The Employee Benefits Institute of America ERISA Handbook states: “Subject to narrow exceptions, ERISA requires every employee benefit plan to have a Summary Plan Description. According to the U.S. Dept of Labor (“DOL”), the SPD is the primary vehicle for informing participants and beneficiaries about their rights and benefits under the employee benefit plans in which they participate. However, the DOL does not define the SPD; instead it sets out with great specificity how the SPD must be written and what information it must contain.” Plans must distribute to covered participants upon the following:

• Within 90 days of plan enrollment • Within 120 days after plan 1st becomes subject to ERISA • Every 5 years

No template Exists as SPDs are too specialized

Summary P lan Description (SPD)

Newborns’ and Mothers’ Health Protection Act

NMHPA is a federal law that affects the length of time a mother and newborn child are covered for a hospital stay in connection with childbirth. In general, group health plans may NOT restrict benefits for a hospital stay in connection with childbirth to less than 48 hours following a vaginal delivery or 96 hours following a delivery by cesarean section. Notice Requirement applies to all plans that offer maternity Can be included in SPD. Model language (one paragraph) provided on DOL website

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwi6w5KAi5TiAhVCT98KHcK6BRUQjRx6BAgBEAU&url=https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/protections-for-newborns&psig=AOvVaw2yKNbGCixPLS9VRZsRa_3i&ust=1557684980487371

Women’s Health & Cancer Rights Act Notice

Notice states that the Plan provides the following benefits in connection with a covered mastectomy:

1. Reconstruction of the breast on which the mastectomy was performed 2. Surgery and reconstructions of the other breast to produce a symmetrical

appearance. 3. Prosthesis and physical complications of all stages of the mastectomy including

lymphedemas

Timing: Immediately upon enrollment in the Plan; once annually Note: Your health insurer MAY be providing the Notice to enrolled employees

Initial C OBRA Notice

The Notice provides important information about an employee’s right to COBRA continuation coverage. • Must be provided to covered employee and spouse (within 90 days) of

being covered under the Plan • Model Notice (3 pages) available from US Department of Labor

dol.gov/sites/default/files/ebsa/laws.../cobra/model-general-notice.doc

New Hire / Upon Eligibility Notices: Potential Penalties

Notice Potential Penalties

Employer “CHIP” Notice Up to $100 per day per failure

HIPAA Notice of Special Enrollment Rights $100 per failure up to $25,000

Medicare Part D Creditable/Non-creditable Disclosure Notice No monetary penalties as of yet

Exchange Notice No specific penalty, but possibility of civil action

Summary of Benefits & Coverage (SBC) Penalty of up to $1,000 per failure

Massachusetts PFML Notice First violation: $50 per employee Second + violation(S): $300 per employee

Notice Timelines Description Upon

Hire At or Prior to Enrollment

After Enrollment

Annual

Notice of Exchange Special Enrollment Rights Notice Medicare Part D Creditable Coverage Notice

Grandfather Health Plan Notice WHCRA Notice CHIP Notice Initial COBRA Notice MA PFML Employee Notice

Notice Timelines

Filings & Disclosures to Governmental Agencies

• Form W-2 Reporting

• IRS Forms 1094 & 1095

• IRS Form 5500 Filing Requirement

• Medicare Part D Creditable Rx Coverage Disclosure

Form W-2 Reporting If Employer filed 250+ Forms w-2 in previous year, then must report aggregate cost of employer-sponsored health coverage on Form W-2. • Aggregate cost = Employee + Employee Contribution • Includes dental/vision/Rx if combined with Medical • Includes EMPLOYER contributions to Health FSAs • Does NOT include HRA, EE contribution to health FSA, HSA, cancer coverage, etc. • Work with payroll provider to report on W-2, Line 12, Code: DD • W-2s are due by Jan 31 each year

IRS Forms 1094 and 1095

Forms 1094-B & 1095-B: • Small, self-insured employers • Report on covered individuals • Must be filed with IRS

Forms 1094-C and 1095-C • Large employers (50+ FTEs): fully & self

insured • Report on full-time employee (and

covered individuals, if self-insured) • Must be filed with IRS • Must file electronically if filing 250+ forms

IRS Form 5500 and Schedules Annual report to U.S. Dept. of Labor containing specific plan information • Generally for ERISA plans with 100+ participants at the beginning of the Plan Year. If

fewer than 100 participants and self insured, may be required to file. • Form 5500 Filing must include related schedules • Generally due by the last day of the seventh month following end of Plan Year – July

31 if a Calendar Year Plan. • Can obtain a two and one half month extension by filing Form 5558 with the IRS

Medicare Part D: Disclosure to CMS

• Applicable for Plans that Provide Prescription Drug benefits to any Part D. eligible individuals

• Must be filed with CMS annual within 60 days after the beginning of the

Plan year (or within 30 days of change in creditable Rx drug status)

• Online Disclosure to CMS: • cms.gov/Medicare/Prescription-Drug-

Coverage/CreditableCoverage/CCDisclosureForm.html

Paid Family and Medical Leave: Next Steps 1. Post the employee notice poster immediately 2. Determine whether to withhold employee contributions from paychecks

– by 5-31-2019 3. Contact your payroll provider for guidance with instruction and

MassTaxConnect filings 4. Provide individual employee / 1099 –MISC notices and collect

acknowledgement – by 05-31-2019; NOW EXTENDED to 6-30-2019 5. Review existing time-off and benefits plans to ensure coordination & no

overlap

MA P FML Employee Notice Poster

• Posted at workplace in location

where it can be read easily • No provision for electronic

“posting” • POST NOW

mass.gov/paid-family-and-medical-leave-mandatory-workplace-poster/download

Most common errors that the IRS finds

• Plan documents aren’t in good order and/or amendments weren’t adopted in timely fashion

• Not using the definition of compensation that is in the plan document • Late loan payments that should be deemed distributions, not following loan

provisions in document, or failure to pay 10% early distribution penalty • IRS determines that company is part of a controlled group, coverage, HCE,

with ADP/ACP implications • HCEs were determined incorrectly (possibly due to ownership attribution

rules) • Incorrectly excluding part-time employees • Fluctuations in plan participants, (partial termination) • “Other Assets” not valued properly

If the IRS finds an error in one year, they will often open additional years…






audit on the plan.






audit on the plan.

Why a plan is chosen for audit

• An IRS audit can be randomly generated, caused by a response on the Form 5500 or part of a focused audit.

• A DOL benefits advisor may contact the employer due to an employee question or complaint. If the employer works with the benefits advisor to address their concerns the employer may be able to avoid an audit. If an employer does not respond, if there appears to be a violation that is systematic and widespread, if the company is in financial distress, or if criminal activity is suspected chances are you will not be able to avoid an audit.

• If an error or potential ERISA violation was on a Form 5500, the DOL may open an audit on the plan.






audit on the plan.






audit on the plan.

Items the agent wants to receive prior to visit

If you are using a prototype or volume submitter plan:

• A copy of the IRS opinion letter or advisory letter issued to the sponsor of the prototype or volume submitter plan

• The executed Adoption Agreement along with any amendments and the Master Plan Document (Base Document)

• The summary plan description (SPD), summaries of all material modifications (SMM), and the summary annual report (SAR)

• Copies of the 5500s filed for the year under examination, the preceding year and succeeding year

Items to be made available during in-person exam

• Copies of the ADP and ACP tests

• Copy of the census reports and participant allocation schedule for the employer contributions

• The employer's records that were used to determine employees' eligibility to take part in the plan for the year(s) under examination; such as payroll records, time cards, personnel records, and employment contracts. Also include a copy of the Forms 940, Employer's Annual Federal Unemployment Tax Return; Forms 941, Employer's Quarterly Federal Tax Return; Forms W-2, Wage and Tax Statement; and related Forms W-3, Transmittal of Income and Tax Statements

• Identification/documentation of any controlled group members or other related entities

More items made available during in-person exam

• A demonstration outlining how the plan satisfied the minimum coverage requirements of IRC 410(b)

• Evidence of a fidelity bond for all people handling trust assets as required by ERISA section 412(a)

• Supporting documents for all plan assets and liabilities, such as broker's statements, bank statements, insurance contracts, loan documents, deeds, etc. and how assets are valued at fair market

• Copies of the loan agreements for all outstanding participant loans as of the end of the plan year under examination

• Reconciliation of distributions on Schedule H and provide the 1099-Rs

C orrecting the problems before the IRS finds them

• If you become aware of plan errors, the IRS allows plan sponsors to correct them before they are discovered on audit. Revenue Procedure 2019-19 contains the Employee Plans Compliance Resolution System “EPCRS” which spells out how different types of errors should be corrected.

• EPCRS allows you to correct “insignificant” errors on your own with no IRS involvement. The premise of the program is to put the participants in the position they would have been had the error not occurred.

• “Significant” errors must be submitted to the IRS using the Voluntary Compliance Program (VCP), unless you correct them by the end of the 2nd plan year following.

• In general, document issues must be submitted through VCP. • Once an audit of a plan has commenced, VCP is no longer available as an

option to correct a plan defect. • On audit the IRS will almost certainly require a significantly greater penalty

than the comparatively small fee payable to the IRS under VCP






audit on the plan.






audit on the plan.

What wil l the DOL request?

Everything the IRS requested plus:

• Minutes of Plan Board of Trustees’ Meeting and committee meeting minutes

• Service agreements and fee schedules for Plan fiduciaries and service providers

• Documents evidencing employer contributions

• Documents evidencing the timing of deposit of employee deferrals

• Description of how all contributions are forwarded to the trustee, custodial trustee, or investment manager

• Proof that notices were sent timely, fee disclosure notices (408(b)(2)/404(a)(5)), Blackout notices, etc.






audit on the plan.






audit on the plan.

What is the DOL looking for?

Everything the IRS is looking for Plus:

• Late deposits of employee deferrals and loan repayments into the plan

• Inadequate documentation of the Governance of the Plan • Approving investment options • Reviewing plan expenses • Evaluating plan design

• Review of service providers (SSAE 16 reports and consideration of user

controls)






audit on the plan.






audit on the plan.

C orrection programs available

• If a sponsor has 5500s that have not been filed or were filed late you can use the Delinquent Filer Voluntary Correction Program to correct that at a fraction of what the regular penalty would be.

• If you have made late deferral contributions we can self correct that by using or following the correction procedures in the DOL’s Voluntary Fiduciary Correction Program.






audit on the plan.






audit on the plan.

Best practices

• Keep plan documents and records in one place for at least 6 years as ERISA requires.

• Have a Plan Document and SPD for your health and welfare plan.

• Understand your business structure. Are you art of a controlled group or affiliated service group. This determination effects your ability to properly perform discrimination testing on your plan and to properly draft plan documents.

• Keep Notices - safe harbor notices, SPDs, SARs, proof of opportunity to enroll, notice of RMDs.

• Also keep proof and verification of hardship, loan paperwork, dates of termination and reasons and hours worked.






audit on the plan.






audit on the plan.

Best practices

• Be mindful of participant complaints. If sponsors are proactive they can address issues before they become larger problems.

• Have periodic meetings, prepare minutes and document reasons for making decisions. Establish written policies and procedures and follow them. A Sponsor need to monitor their service providers, their investment options, have an Investment Policy Statement and follow it. ERISA requires that a sponsor act for the exclusive benefit of the participants and that they act prudently in making their decisions.

• Internal Audit. Every few years a client should make sure the plan documents match what is being done operationally. In order to use the EPCRS correction program that we discussed the IRS requires that a sponsor have established procedures. A plan document alone does not constitute evidence of established procedures. This type of mini audit will help demonstrate this.






audit on the plan.






audit on the plan.

Avoiding Fiduciary liability and lawsuits

• Make sure fees are reasonable. Consider periodic RFPs and benchmarking.

• Train plan fiduciaries/committee members (DOL Audits now ask about this)

• Delegate by Hiring a 3(16) Plan Administrator or 3(21)/ 3(38) Advisor • Managing a retirement plan is not your core competency. • There are many moving parts. • Plans require cross functional cooperation between HR payroll and finance. • Business turnover creates gaps and inconsistencies which increase fiduciary

risk.

• Professional Liability (E&O) Coverage • Confirm that you and your service providers have sufficient level of

professional liability coverage or errors and omissions insurance to pay any potential claims made against it.

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Questions?