401(k) Seminar – If you would like to request an invitation – email us today.

Thursday, May 17, 2012 Posted by bcspec

Attendance is by invitation and RSVP acceptance only. (Seats are limited)

Tuesday, June 5th, 2012 7:45 – 10:45 AM

Location: JSC Gilruth Center, The Longhorn Room
Title: RCNSS, BCS Meeting

We are honored that Solomon Evangelista Director of Program Development for the Heartland Institute of Financial Education has offered to speak about the following topics.  Solomon’s presentation will have 2 hours of CE credits. (See Solomon’s Bio at the end of this email)

There will be 2 session presented by The Heartland Institute of Financial Education

(2-Credit Hours)

Session 1:  HR Guide To Employee Financial Wellness

  • America’s Greatest Financial Fear
    • How Prepared Are We For Retirement
    • Financial Distress, Health & Employer’s Bottom Line
    • Defined Benefit Retirement Pensions
    • Defined Contribution Retirement Savings Plans
    • Important Language In the 1974 ERISA Act – Information HR Personnel Should Know
    • Future Litigations For Employers
    • Research Shows Health & Personal Finances Are Correlated
    • Personal Financial Well-Being Scale & Score Interpretation
    • How Can Employers Save $750-$2000 Plus Per Employee?
    • Why Does Quality Financial Education Work?
    • How Can An Employer Bring Financial Wellness To Their Employees?
    • Highly Compensated Employees Need Financial Education Too

How Does Financial Wellness Help HR Professionals?

Session 2: Company Sponsored Retirement Plans

  • The Roth 401(k)
  • The Impact of 2008
  • Employee Confidence Then & Now
  • Financial Distress and Health Issues
  • The Tripod of Economic Security
  • Retirement Expectations Today
  • The ERISA Act and What It Says
  • Understanding & Guiding Employees

Driving Directions to Gilruth Center at Johnson Space Center

From Downtown Houston — Proceed South on I45 to the Bay Area Blvd. exit [#26] or NASA Road 1.

From Galveston– Proceed North on I45 to NASA Road 1 or the Bay Area Blvd. exit [#26].

If exiting NASA Road 1, stay on NASA Rd 1 until you reach Space Center Blvd. Take a left on Space Center Blvd. and go approximately 1.8 miles to Gate 5, turning left into the Gilruth Center.

If exiting Bay Area Bvld., stay on Bay Area Blvd. until you reach Space Center Blvd. Take a right on Space Center Blvd. and go approximately 2.2 miles to Gate 5, turning right into the Gilruth Center.

Email: rsvp@bcspec.com or call 281-333-2255 to request an invitation.

__________________________________________________________________________-

SOLOMON  EVANGELISTA’S BIOGRAPHY

Solomon Evangelista – Director of Program Development for the Heartland Institute of

Financial Education

Solomon Evangelista graduated with honors at Embry-Riddle Aeronautical University (ERAU) where he earned his Bachelor’s degree in Aerospace Engineering and Mathematics. While at ERAU, he earned scholarships from National Aeronautics & Space Administration (NASA), McDonnell Douglas, and Lockheed. He pursued his Master’s degree in Mechanical Engineering at The George Washington University. Solomon worked for NASA Goddard Space Center where he spent over 7 years pursuing the Astronaut Program. He helped design, build, test, launch and track seven different satellite projects for the Air Force, Navy, and other private companies.

Mr. Evangelista started his dual career in the mortgage business for 2 years then transitioned full-time to the financial services industry where he spent over 15 years with AEGON. He was a Top Producer and Top Builder and was recognized as the Marketing Director of the Year in 1996. He was recognized as a Senior Co-Founder and later was appointed to the Presidential Advisory Group where he was responsible for the product and marketing development for multiple carriers.

Mr. Evangelista founded KAINOS Asset Management based out of Sugar Land, TX. KAINOS currently has over 80 advisors with an average of 10-years experienced in the financial industry. KAINOS has 6 offices nationwide including in California, Maryland, North Carolina, Georgia and Texas. KAINOS is focused on providing financial literacy to the consumer by reaching out to employers at the worksite to educate employees about the fundamentals of financial management.

Mr. Evangelista currently works with a Non-Profit organization called, The Heartland Institute of Financial Education, to provide financial literacy for employees at their worksites. The program is designed to be “non-solicitous” in order to educate the employees without the hassle of having to deal with any sales oriented approach.

Mr. Evangelista has taught Financial Wellness classes for NASA Johnson Space Center, Schlumberger, Honeywell, Jacobs Engineering, Bastion Technologies, Lockheed Martin, Wyle, Shell Federal Credit Union, Texas A&M, Texas School of Chiropractic, TMK IPSCO, Port of Galveston, IEEE, and Workforce Solutions in the Houston metropolitan area.

Mr. Evangelista currently holds the designation of CFE Certified Financial Educator® which is the only designation of its kind that is registered with FINRA. He acquired his Securities Series 6, 63, 26 licenses, life & health insurance license in 1994, and is actively licensed in 22 states.

Solomon Evangelista was recently inducted to the Heartland Institute of Financial Education’s Board of Advisors. He also is a Board Member for the Mosaic Learning Center and Diversified Financial Center. He is actively involved with the Sugar Land Exchange Club as well as an advisor to the International Victory Christian Church & Mosaic Community Covenant Church.

More FAQs Issued on Summary of Benefits and Coverage

Tuesday, May 15, 2012 Posted by bcspec

The Affordable Care Act (ACA) requires health plans and health insurance issuers to provide applicants and enrollees with a concise document providing simple and consistent information about health plan benefits and coverage. This document, which is called a summary of benefits and coverage (SBC), is intended to help health plan consumers better understand the coverage that they have and to help them make easier comparisons when shopping for new coverage.

On Feb. 9, 2012, the Departments of Health and Human Services (HHS), Labor and the Treasury (Departments) issued final regulations for the SBC. Plans and issuers must start providing the SBC as follows:

  • Issuers must provide the SBC to health plans effective Sept. 23, 2012.
  • Plans and issuers must provide the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period beginning with the first day of the first open enrollment period that begins on or after Sept. 23, 2012.
  • For participants who enroll in coverage other than through an open enrollment period (for example, newly eligible individuals and special enrollees), plans and issuers must provide the SBC beginning on the first day of the first plan year that begins on or after Sept. 23, 2012.

After the final regulations were issued, the Departments issued frequently asked questions (FAQs Part VIII) to answer additional questions regarding the SBC requirement. On May 11, 2012, the Departments issued the following additional FAQs (Part IX) regarding implementation of the SBC requirement.

ACA FAQs Part IX

Q1: A previous FAQ outlined the circumstances in which an SBC may be provided electronically. The FAQ discussed a safe harbor for providing the SBC to participants or beneficiaries covered under the plan who are able to effectively access documents provided in electronic form at the worksite. Are there any additional safe harbors for electronic delivery of SBCs?

Yes. The Departments have adopted the following additional safe harbor. SBCs may be provided electronically to participants and beneficiaries in connection with their online enrollment or online renewal of coverage under the plan. SBCs also may be provided electronically to participants and beneficiaries who request an SBC online. In either case, the individual must have the option to receive a paper copy upon request. (In addition, for individual market issuers that offer online enrollment or renewal, the SBC may be provided electronically, at all issuances, to consumers who enroll or renew online, consistent with the regulations.)

Q2: What are the circumstances that will trigger the requirement for an issuer to provide an SBC to an individual applying for coverage in the individual market, or to a group health plan or its sponsor applying for coverage? In particular, how do the terms “upon application” and “first day of coverage (if there are changes)” apply to an individual (or a plan or its sponsor) shopping for coverage?

The regulations state that a health insurance issuer must provide the SBC upon application for health coverage. For this purpose, a plan or issuer must provide the SBC as soon as practicable, but no later than seven business days after receiving a substantially complete application for a health insurance product.

If an individual, plan or plan sponsor is negotiating coverage terms after an application has been filed and the information required to be in the SBC changes, an updated SBC is not required to be provided (unless an updated SBC is requested) until the first day of coverage. The updated SBC should reflect the final coverage terms under the contract, certificate or policy of insurance that was purchased.

Q3: If an individual (or a plan or its sponsor) receives an SBC prior to application for coverage, must an issuer automatically provide another SBC upon application, if the information required to be in the SBC has not changed?

No. A duplicate SBC is generally not required to be provided at the time of application unless requested by the applicant. However, if by the time the application is filed, there is a change in the information required to be in the SBC, the issuer or plan must update and provide a current SBC to the individual (or plan or its sponsor) as soon as practicable following receipt of the application, but in no event later than seven business days following receipt of the application. Similarly, if an SBC is provided upon application, there is no requirement to provide the SBC again on the first day of coverage, unless there is a change to the information that is required to be in SBC or an SBC is requested by the applicant.

Q4: Are issuers required to provide SBCs to group health plans (or their sponsors) who are “shopping” for coverage, but have not yet submitted an application for coverage?

Yes, but only in certain circumstances. The regulations generally provide that an SBC must be provided upon request for an SBC or “summary information about a health insurance product.” The latter phrase is intended to ensure that persons who do not ask exactly for a “summary of benefits and coverage” still receive one when they explicitly ask for a summary document with respect to a specific health product. Other, general questions about coverage options or discussions about health products do not trigger the requirement to provide an SBC. (See also Q1 regarding electronic delivery options for providing SBCs.)

Q5: A previous FAQ stated that an SBC provided in connection with a group health plan may include a reference to the summary plan description (SPD). For SBCs provided in connection with coverage in the individual market, can the SBC refer to other documents associated with the coverage?

Yes. While it is not permitted to substitute a reference to any other document for any content element of the SBC, an SBC may include a reference to another document in the SBC footer. In addition, wherever an SBC provides information that fully satisfies a particular content element of the SBC, it may add to that information a reference to specified pages or portions of other documents in order to supplement or elaborate on that information.

Q6: Are certain electronic features (such as scrolling and expansion of columns) permitted when displaying the SBC electronically?

Yes. Minor adjustments are permitted to accommodate the plan’s or issuer’s information and electronic display method, such as expansion of columns. Additionally, it is permissible to display the SBC electronically on a single Web page, so the viewer can scroll through the information required to be in the SBC without having to advance through pages (as long as a printed version is available that meets the formatting requirements of the SBC). However, the deletion of columns or rows is not permitted when displaying a complete SBC.

(For more on minor adjustments, see FAQs Part VIII at www.dol.gov/ebsa/faqs/faq-aca8.html and cciio.cms.gov/resources/factsheets/aca_implementation_faqs8.html. Specifically, Q3 and Q4 state that “plans and issuers may combine information…provided the appearance is understandable” and Q19 states that “minor adjustments are permitted…as long as the information is understandable.”)

Q7: Some plans or issuers provide Web-based or print materials to illustrate the differences between benefit package options (including comparison charts and broker comparison websites). Is it permissible to “combine” SBCs or SBC elements to provide a side-by-side comparison?

Yes. Issuers and plans (and agents and brokers working with such plans) may display SBCs, or parts of SBCs, in a way that facilitates comparisons of different benefit package options by individuals and employers shopping for coverage. For example, on a website, viewers could be allowed to select a comparison of only the deductibles, out-of-pocket limits or other cost sharing of several benefit package options. This could be achieved by providing the “deductible row” of the SBC for several benefit packages, but without having to repeat the first one or two columns, as appropriate, of the SBC for each of the benefit packages.

However, such a chart, website, or other comparison does not, itself, satisfy the requirements under PHS Act section 2715 and the final regulations to provide the SBC. The full SBC for all the benefit packages included in the comparison view/tool must be made available in accordance with the regulations and other guidance.

Q8: Under what circumstances can penalties be imposed for failure to provide the SBC or the uniform glossary?

PHS Act section 2715(f) states that an entity is subject to a fine if the entity “willfully fails to provide the information required under this section.”

As stated in previous FAQs, the Departments’ basic approach to ACA implementation is: “[to work] together with employers, issuers, states, providers and other stakeholders to help them come into compliance with the new law and [to work] with families and individuals to help them understand the new law and benefit from it, as intended. Compliance assistance is a high priority for the Departments. Our approach to implementation is and will continue to be marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law.” Accordingly, consistent with this guidance, during this first year of applicability, the Departments will not impose penalties on plans and issuers that are working diligently and in good faith to comply.

Q9: For the first year of applicability, can the Departments provide further assistance with regard to the coverage examples, such as a streamlined calculator?

Yes. The Departments are developing a calculator that plans and issuers can use as a safe harbor for the first year of applicability to complete the coverage examples in a streamlined fashion. Because this approach will be less accurate, it will be allowed as a transitional tool for the first year of applicability. (The SBC template makes clear that the coverage examples are not a cost estimator and should not be used to estimate a particular individual’s actual expenses under the plan.)

The calculator will allow plans and issuers to input a discrete number of elements about the benefit package. Calculator inputs generally are expected to be taken from data fields used to populate the front portion of the SBC template. (See http://cciio.cms.gov/resources/other/index.html#sbcug for a list of calculator inputs.) The output will be a coverage example that can be added to the corresponding SBC. The Departments will also provide the algorithm that was used to create the calculator. The calculator and algorithm will be posted at http://cciio.cms.gov/resources/other/index.html#sbcug soon.

(In the final regulations, FAQs Part VIII and in these FAQs, the term “first year of applicability” refers to SBCs and uniform glossaries provided with respect to coverage beginning before Jan. 1, 2014.)

Q10: A previous FAQ discussed the utilization of “carve-out arrangements” under which a plan or issuer contracts with a service provider to help manage certain benefits under the plan or policy. In another type of “carve-out arrangement,” a plan sponsor may purchase an insurance product for certain coverage from a particular issuer and purchase a separate insurance product or self-insure with respect to other coverage (such as outpatient prescription drug coverage).  In these circumstances, the first issuer may or may not even know of the existence of other coverage, or whether the plan sponsor has arranged the two benefit packages as a single plan or two separate plans.

What are an issuer’s obligations to provide an SBC with respect to benefits it does not insure?

Unless it contracts otherwise, an issuer has no obligation to provide coverage information for benefits that it does not insure. However, group health plan administrators are responsible for providing complete SBCs with respect to a plan. A plan administrator that uses two or more insurance products provided by separate issuers with respect to a single group health plan may synthesize the information into a single SBC, or may contract with one of its issuers (or other service providers) to perform that function.

Due to the administrative challenges of combining benefit package information from multiple issuers, during the first year of applicability, for enforcement purposes, with respect to a group health plan that uses two or more issuers, the Departments will consider the provision of multiple partial SBCs that, together, provide all the relevant information to meet the SBC content requirements. In such circumstances, the plan administrator should take steps (such as a cover letter or a notation on the SBCs themselves) to indicate that the plan provides coverage using multiple different insurers and that individuals who would like assistance understanding how these products work together may contact the plan administrator for more information (and provide the contact information).

See the sample completed SBC template, as well as Q3, Q4, and Q6 of FAQs Part VIII at www.dol.gov/ebsa/faqs/faq-aca8.html and http://cciio.cms.gov/resources/factsheets/aca_implementation_faqs8.html for more information on circumstances when it may be helpful to note assumptions or other information in connection with the SBC coverage examples.

Q11: A previous FAQ provided a link where written translations for the SBC template and the uniform glossary would be available in the future. Are these translations available?

Written translations in Spanish, Chinese and Tagalog are now available. Navajo translations will be available shortly. For more information, see CCIIO website at http://cciio.cms.gov/programs/consumer/summaryandglossary/index.html.

Q12: Are health insurance issuers required to provide SBCs for insurance products that are no longer being offered for purchase?

The Departments understand that most plans and issuers have to develop new databases and technology systems in order to extract information about coverage terms and provide SBCs. The Departments also understand that, with respect to insurance products that are no longer being offered for purchase (sometimes referred to as closed blocks of business), there is a significant volume of data that is not stored in electronic form or is not stored in an information system that that is compatible with the new electronic systems being developed for the SBC. Accordingly, due to the additional administrative complexities with respect to providing SBCs with respect to closed blocks of business, the Departments will not take any enforcement action against a plan or issuer for failing to provide an SBC before Sept. 23, 2013 with respect to an insured product that is no longer being actively marketed for business, provided the SBC is provided no later than Sept. 23, 2013 (at which time, enrollees and small employers will have new opportunities to compare coverage options available through an Exchange).

Q13: Expatriate plans and policies face special circumstances and considerations in complying with the SBC requirements. Can the Departments provide any assistance or relief with respect to expatriate coverage?

Yes. The Departments recognize that expatriate coverage carries additional administrative costs and barriers in filling out SBCs, including benefit and claims systems that are distinct from those for domestic coverage, which makes compliance more difficult. Therefore, for purposes of enforcement, the Departments will not take any enforcement action against a group health plan or group health insurance issuer for failing to provide an SBC with respect to expatriate coverage during the first year of applicability.

Q14: Other than the FAQs, are there any updates to the SBC template and related documents on the Departments’ websites that I need to know about?

Yes. In the diabetes treatment scenario, the version originally posted contained a typographical error, listing the allowed amount for insulin as $11.92, rather than $119.20 – a difference that impacts the total cost of care for diabetes in the coverage example calculations.

To correct this error, the Departments have posted updated versions of the SBC template, the sample completed SBC, and the guide for coverage examples calculations – diabetes scenario. The updated SBC template and sample completed SBC also include sample taglines for obtaining translated documents, to be included if appropriate consistent with paragraph (a)(5) of the regulations, as well as updated Sample Care Costs amounts for the diabetes coverage example, due to more accurate rounding in making these calculations. Finally, the updated versions include some appearance modifications (such as changes in bolding, underlining, shading, capitalization, margin justification, use of hyphens and row and column sizing) to ensure the document is accessible to individuals with disabilities, consistent with section 508 of the Rehabilitation Act. Plans and issuers may use either version, or may make similar modifications to their own SBCs, without violating the appearance requirements for an SBC.

The updated versions of these documents are labeled “corrected on May 11, 2012” in the lower right corner of the first page and are available at www.dol.gov/ebsa/healthreform and http://cciio.cms.gov/. These three documents replace the prior versions issued contemporaneously with the final regulations in February 2012.

more information

The final regulations on the SBC are available at www.regulations.gov/#!documentDetail;D=HHS_FRDOC_0001-0442.

More information on the SBC requirement, including a model template, is available through http://cciio.cms.gov/programs/consumer/summaryandglossary/index.html.

Source: Departments of Health and Human Services, Labor and the Treasury

Legislative Update – Q&As on Medical Loss Ratio Rules

Thursday, May 10, 2012 Posted by bcspec

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The Affordable Care Act’s medical loss ratio (MLR) rules mandate that health insurance issuers report how they spend their premium revenue to the Department of Health and Human Services (HHS). In addition, issuers that do not spend at least 80 percent (small group and individual markets) or 85 percent (large group market) of their premium revenue on reimbursement for clinical services and health care quality improvement must provide rebates to consumers beginning in 2012. The first round of rebates under the MLR rules is due by Aug. 1, 2012.

HHS issued regulations to implement the MLR rules in 2010 and 2011. These regulations are available through HHS at: http://cciio.cms.gov/resources/regulations/index.html#mlr. On April 20, 2012, HHS issued additional guidance on the MLR rules in the form of questions and answers (Q&As). These Q&As address a number of topics related to the MLR rules, including counting employees for determining market size, offering a “premium holiday” and distributing rebates as pre-paid debit cards.

APPLICABILITY OF THE MEDICAL LOSS RATIO RULE TO CERTAIN TYPES OF PLANS (45 CFR §158.102)

Q: Are self-funded plans subject to the MLR reporting and rebate requirements?

A: No. Section 2718(a) of the PHS Act and its implementing regulation, 45 CFR §158.102, provide that the MLR requirements apply to health insurance issuers offering group or individual health insurance coverage. A self-funded plan (sometimes referred to as a self-insured plan) is not a health insurance issuer, as defined by § 2791(b)(2) of the PHS Act, and thus is not subject to the MLR requirements. It does not matter if the self-funded plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA) or if it is a non-ERISA plan.

Q: Is the experience for health insurance benefits provided through a Medicaid managed care organization (MCO) contract with a state Medicaid agency to provide benefits to Medicaid beneficiaries subject to the MLR reporting and rebate requirements?

A: No. Section 2718(a) of the PHS Act applies to health insurance issuers offering employer group or individual health insurance coverage. Medicaid coverage offered under a contract with a state Medicaid agency is governed by Title XIX of the Social Security Act and regulations at 42 CFR Part 438, and not by state insurance law. Under these circumstances, issuers are not offering group health insurance coverage as defined under §2791(b)(4) of the PHS Act because the coverage is not offered in connection with a group health plan, nor are they offering individual health insurance coverage as defined under §2791(b)(5) of the PHS Act, because the coverage is not offered to individuals in the individual market. Congress recognized the inapplicability of Title 27 of the PHSA to MCO contracts when it enacted section 1932(b)(8) of the Social Security Act, which makes some, but not all, Title 27 requirements applicable to Medicaid MCO contracts.

Q: Is the experience for health insurance benefits provided through a contract with CMS that offers health insurance coverage through Medicare, such as Medicare Advantage plans (Medicare Part C) and Medicare prescription drug plans (Medicare Part D), subject to the commercial MLR reporting and rebate requirements?

A: No. Section 2718(a) of the PHSA applies to health insurance issuers offering group or individual health insurance coverage. Medicare Advantage plans and Medicare Part D prescription drug plans are not group health insurance coverage as defined under §2791(b)(4) of the PHSA (because the coverage is primarily provided under a contract with the Medicare program, not an employer group health plan) or individual health insurance coverage as defined under §2791(b)(5) of the PHSA (because the coverage is not offered to individuals in the individual market). Such coverage is instead subject to a comprehensive regulatory scheme under Parts C and D of Title XVIII of the Social Security Act and regulations at 42 CFR Parts 422 and 423. Congress clearly recognized the inapplicability of the MLR requirements in section 2718 to Medicare Advantage plans when it added separate and distinct MLR requirements to the Part C statute. This answer applies even in cases in which the Medicare Part C or Part D plan is designed for members of an employer group under section 1857(i)(1) of the Social Security Act.

Q: Are blanket health insurance policies subject to the MLR reporting and rebate requirements?

A: Some states categorize certain health insurance coverage as blanket health insurance policies distinct from group and individual health insurance coverage. Guidance issued under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) at 62 FR 16893, 16896 (April 8, 1997) addressed the interaction of federal regulations with state law, and noted that federal law categorizes health insurance coverage into two markets, group market and individual market. The PHS Act does not include the term blanket coverage. The Affordable Care Act does not modify the types of coverage that fall within the PHS Act, and the 1997 HIPAA guidance remains in effect. Even if a state law defines certain coverage as blanket coverage, an issuer offering such blanket coverage is subject to the MLR requirements if the coverage meets the definition of group or individual health insurance coverage under §2791 of the PHS Act.

EMPLOYER GROUPS OF ONE (45 CFR §158.103)

Q: The MLR regulation, 45 CFR 158.103, defines a small employer as having 1-100 (or at state option, 1-50) employees. When is a health plan a group of one and thus reported with small group market experience and when is it reported with individual market experience?

A: PHS Act §2791 defines the terms “individual market,” “large group market” and “small group market.” We codified those terms in 45 CFR §158.103. To be considered a group health plan, the health plan must have “employees” among its participants. For the purpose of determining whether a group health plan exists, federal law does not classify an individual and his or her spouse as employees when the trade or business is wholly owned by the individual or by the individual and his or her spouse. Thus, where a sole proprietor and/or a spouse-employee are the only enrolled employees, the health plan would not be considered to be a group health plan. Thus its experience would be aggregated with the issuer’s individual market experience and not with the issuer’s small group market experience.

However, if a sole proprietor enrolls a non-spouse employee, the experience of that plan is part of the small group market for MLR purposes. Even if the only enrollee is an employee who is not an owner or spouse, the plan is part of the small group market for MLR purposes.

COUNTING EMPLOYEES FOR DETERMINING MARKET SIZE (45 CFR §158.103, §158.120, §158.210)

Q: When reporting group MLR experience, what method should issuers use for counting “employees” covered by a group policy that does not cover all of the employees of the employer, where the issuer does not have the information to determine the employer’s total number of employees, which it needs in order to determine whether the group policy should be treated as large group or small group, as required by 45 CFR §158.120, and to determine the MLR standard required by 45 CFR §158.210?

A: At the time of sale, issuers should make every attempt to accurately count the number of employees employed by the group policyholder so as to accurately categorize the group as belonging in the small or large group market.

If the policyholder does not make the issuer’s policy available in all of the states in which it has employees, the issuer may not be able to count all of the employees. For example, an employer may be based in New York with 150 employees in New York and 20 employees in Maryland. The Maryland employees may have health insurance with one issuer while the New York employees are covered by a different and separate (affiliated or unaffiliated) issuer. The issuer of the Maryland policy may not know the total number of the policyholder’s employees and may categorize the group in its systems to be in the small group market for purposes of the policy it issues, the rates it charges and so forth. In such a situation, the issuer may determine the group size for MLR reporting purposes and the minimum MLR standard based on the information available to the issuer. Unless the issuer has information which puts the issuer on notice that the total number of employees would cause the plan to be a large group for MLR purposes, the issuer may determine the number of employees solely based on the number of employees in Maryland and it may report the experience of the policy in the small group market or large group market based on the number of the plan’s Maryland employees.

This guidance is intended to clarify CMS’ prior guidance on Counting Employees for Determining Market Size, which is available at http://cciio.cms.gov/resources/files/20110718_mlr_guidance.pdf, and amends the prior guidance only insofar as the situation presented by the scenario in this guidance is concerned.

INDIVIDUAL ASSOCIATION POLICIES (45 CFR §158.120(d))

Q: In what state should issuers report their MLR data for individual or non-group association policies?

A: Issuers should report their MLR data for individual or non-group association policies in the state where the individual resides at the time the certificate of coverage is issued. Some individual policies are issued through an association, such as the Automobile Association of America, to individual members of the association. In this instance, the association may be located in a different state than the insured resides. The association is the policyholder and the covered individual receives a certificate of coverage. 45 CFR §158.120(d) instructs issuers to include the experience for individual market business sold through an association in the state report for the “issue state of the certificate of coverage.” This is the state where the insured individual resides at the time the certificate of coverage is issued, not the state where the association or policyholder is located, or the state in which the issuer is located.

This guidance is intended to clarify CMS’ prior guidance on the Application of Individual and Group Market Requirements under Title XXVII of the Public Health Service Act when Insurance Coverage Is Sold to, or through, Associations, which is available at http://cciio.cms.gov/resources/files/association_coverage_9_1_2011.pdf.pdf.

OFFERING POLICYHOLDERS A “PREMIUM HOLIDAY” (45 CFR §158.130)

Q: If, during a MLR reporting year, an issuer finds that its MLR is lower than the standard required by 45 CFR §§158.210 and 158.211, may the issuer institute a “premium holiday” in order to avoid having to pay rebates?

A: Neither the MLR regulation nor the PHS Act address whether an issuer may offer its policyholders a “holiday” from owing premiums. Premiums are established and collected in accordance with state law and the terms of the policy or contract that, where required, is filed with the applicable state regulatory agency. Thus, whether a premium “holiday” is permissible is a matter of state law.

An issuer seeking to temporarily suspend or reduce premiums in a state’s individual, small and/or large group market should check with its state regulatory agency as to whether it may do so. However, if an issuer chooses to provide a premium holiday and its state regulator allows it to do so, HHS expects that the premium holiday would be provided in a non-discriminatory manner, meaning that it is offered to every policyholder in a state’s market and not based on product type or the experience of a particular policy. An issuer that offers a premium holiday is responsible for refunding any overpayment of premium by a policyholder who is offered a premium holiday but fails to accept or receive such premium holiday for any reason.


REINSURANCE AND REPORTING (45 CFR §158.130(a)(3))

Q: If an issuer reinsures 100 percent of a block of business by entering into reinsurance and administrative services agreements after March 23, 2010, even if the effective date of the agreement(s) is prior to March 23, 2010, is the ceding issuer or the assuming issuer responsible for filing the annual MLR Reporting Form?

A: The assuming issuer is responsible for filing the annual MLR Reporting Form only in the following circumstance. 45 CFR §158.130 (a)(3), states: “Reinsured earned premium for a block of business that was subject to indemnity reinsurance and administrative agreements effective prior to March 23, 2010, for which the assuming entity is responsible for 100 percent of the ceding entity’s financial risk and takes on all of the administration of the block, must be reported by the assuming issuer and must not be reported by the ceding issuer.”

However, the ceding issuer is responsible for filing the annual MLR Reporting Form and issuing any rebates if either of the agreements were entered into after March 23, 2010, even if they have an effective date prior to March 23, 2010.

Q: 45 CFR §158.130(a)(3) states “Reinsured earned premium for a block of business that was subject to indemnity reinsurance and administrative agreements effective prior to March 23, 2010, for which the assuming entity is responsible for 100 percent of the ceding entity’s financial risk and takes on all of the administration of the block, must be reported by the assuming issuer and must not be reported by the ceding issuer.” If the ceding entity performs any administrative functions after the effective date of the reinsurance agreement, is the ceding issuer or the assuming issuer responsible for filing the annual MLR Reporting Form?

A: If the ceding issuer retains responsibility for any administrative functions, related to the reinsured block of business, after the effective date of the reinsurance agreement and administrative agreement, then for MLR reporting and rebate purposes, the ceding issuer remains responsible for filing the MLR Reporting Form and reporting the experience of the block of business that is the subject of the agreement.

Q: If an issuer enters into a 100% indemnity reinsurance agreement and the ceding issuer is responsible for reporting the experience for MLR purposes, may the ceding issuer adjust premiums for taxes paid by the reinsurer on the ceding issuer’s MLR report?

A: No. General accounting principles require alignment between revenue and expenses. If the reinsurer receives the premium revenue for reinsured business and has the legal obligation to pay any tax due on it, and pays such tax, the ceding issuer may not report the tax amount and may not apply it as an adjustment to premiums when completing its MLR Annual Reporting Form and calculating its MLR. This is the case regardless of whether the reinsurer is an affiliate of the ceding issuer. The MLR regulation only permits issuers to deduct those taxes related to a reinsured block of business that were owed and paid by the reporting issuer. Therefore, if the ceding issuer did not owe or pay the related taxes or was reimbursed for premium taxes through any portion of commissions or allowance on reinsurance (see 45 CFR §158.162(b) (2)(ii) and (iii)), the issuer is not allowed to deduct such taxes from premium when reporting its experience.

EXCHANGE USER FEES (45 CFR §158.161(a), §158.221, §158.240)

Q: May an issuer include user fees paid to a state Exchange or a federal Exchange in the federal and state licensing and regulatory fees, as defined in 45 CFR §158.161(a), that must be subtracted from premium in calculating an issuer’s MLR and rebate pursuant to 45 CFR §158.221(c) and 45 CFR §158.240(c)?

A: Yes. Exchange user fees should be included in the licensing and regulatory fees that are subtracted from premium in the MLR calculations. 45 CFR §158.161(a) – Reporting of federal and state licensing and regulatory fees – requires issuers to report as an adjustment to premium “statutory assessments to defray operating expenses of any state or federal department…”. The Affordable Care Act §1311(d)(5)(A) requires states to ensure that the Exchanges are self-sustaining beginning with 2015 and allows the Exchanges to charge assessments or user fees to participating health insurance issuers. HHS’ implementing regulation, at 45 CFR §155.160, provides that as of Jan. 1, 2015, states must ensure that the Exchanges have sufficient funds to support ongoing operations and they may generate funding, such as through user fees on participating issuers, for Exchange operations. 45 CFR §156.50 requires participating issuers to remit user fees and other assessments to the Exchange, whether state- or federally operated.

Since the Exchanges are established as part of a state or federal department and the user fees are intended to support operating expenses, user fees constitute statutory assessments that defray the operating expenses of such department and qualify for inclusion in the licensing and regulatory fees described in 45 CFR §158.161(a).

STATES WITH A HIGHER MEDICAL LOSS RATIO STANDARD (45 CFR §158.211)

Q: If a state requires a higher minimum MLR for state rebate or rate filing purposes than that required by federal law, does the state standard automatically apply to issuers in that state for purposes of the applicable federal MLR?

A: No. 45 CFR §158.211 states that “[f]or coverage offered in a state whose law provides that issuers in the state must meet a higher MLR than that set forth in §158.210, the state’s higher percentage must be substituted for the percentage stated in §158.210 of this subpart.” However, 45 CFR §158.211(b) requires that before a state sets a higher minimum MLR to apply for purposes of the federal MLR, it “must seek to ensure adequate participation by health insurance issuers, competition in the health insurance market in the state and value for consumers so that premiums are used for clinical services and quality improvements.”

Since it would not have been possible for a state to have considered whether its MLR standard should be higher than the federal MLR standard prior to the passage of the Affordable Care Act, HHS will only apply a higher MLR to issuers in states that have taken affirmative action since March 23, 2010 indicating that they have exercised their option pursuant to 45 CFR §158.211 to require issuers to meet a higher MLR standard for federal MLR purposes. Examples of states that have taken such affirmative action are Massachusetts, New Mexico and New York.

MINI-MED EXPERIENCE – APPLICATION OF THE ADJUSTMENT (45 CFR §158.220, §158.221)

Q: Beginning with the 2013 experience, when issuers of mini-med policies calculate their MLR according to the formula in 45 CFR §158.221, should they apply the applicable adjustment (multiplier) for each year to the reported experience from each year and then add each of those adjusted numerators together, or, should the reported experience for each MLR year be added together and then apply the adjustment (multiplier) for the current MLR reporting year to the aggregated experience?

A: 45 CFR §158.220(b) provides that, beginning with the 2013 MLR Reporting year, an issuer’s MLR is calculated according to the formula in §158.221, aggregating the data reported for three years. On Dec. 7, 2011, the Department issued an MLR Final Rule amending §158.221 and providing mini-med issuers with an adjustment (or multiplier) to the numerator of the MLR (i.e., the total of claims and quality improving activities) as follows: a factor of 1.75 for 2012; 1.50 for 2013; and 1.25 for 2014. The multiplier is applied to the numerator of the issuer’s MLR formula.

For non-mini-med experience, each year’s experience is added together to obtain the numerator for purposes of calculating the federal MLR. Similarly, issuers of mini-med policies should add the reported experience for each MLR year together to obtain the numerator and then apply the multiplier for the current MLR reporting year to the aggregated experience. This is consistent with how other experience is aggregated for purposes of calculating the federal MLR.


FORM OF REBATE (45 CFR §158.241)

Q: When providing MLR rebates to current or former enrollees in the individual, small group or large group markets pursuant to 45 CFR §158.241, may issuers use a pre-paid debit card as a means of rebate distribution?

A: Generally, yes. 45 CFR §158.241 states that an issuer may provide rebates in the form of a premium credit, lump-sum check or, if the enrollee paid the premium using a credit or debit card, by returning the entire rebate to the account used to pay the premium. CMS believes that an alternative, such as a debit or credit card, is a reasonable alternative as long as it is as convenient to use as a check and meets all of the conditions described below.

An issuer may provide rebates in the form of a pre-paid debit card (presumably by arrangement with a bank or other financial institution) provided all of the following conditions are met:

  • The applicable policyholder’s or subscriber’s name must be on the card in order to ensure that the rebate reaches the intended policyholder or subscriber and is not stolen or diverted to a creditor or other third party;
  • The card must not have an expiration date;
  • The policyholder or subscriber must not incur any fees in association with the use or non-use of the card. If the institution that issues the card does not have any locations within a reasonable distance to the policyholder’s or subscriber’s mailing address and the policyholder or subscriber incurs a fee from another financial institution in order to cash the card, any such fees imposed by the other financial institution must be reimbursed by the issuing institution;
  • At the policyholder’s or subscriber’s request, the entire balance on the card must be convertible to cash;
  • The policyholder or subscriber must be able to contact the issuer or the issuing institution in order to opt out of receiving the rebate in the form of a pre-paid debit card and request a paper check. Such check must be mailed within ten (10) calendar days of the request;
  • The policyholder or subscriber must be able to contact the issuing institution during normal business hours to obtain the cash value, or balance, on the card; and
  • The policyholder or subscriber must be provided with an easy-to-understand notice of their rights and an explanation of the terms of the card at the time the cards are mailed.

Source: HHS, Centers for Medicare and Medicaid Services

Plan Sponsor 401(k) Tips from Benefit & Compensation Specialists, PLLC

Thursday, May 10, 2012 Posted by bcspec

Reinstating Your 401(k) Match

Budget restraints forced many companies to suspend their 401(k) match in recent years, but the match seems to be rebounding as employers begin reinstating their matching 401(k) contributions. For any employer who removed their match for financial reasons, reinstating it as soon as feasible is a good strategic move for recruiting and retention efforts. Employers who are reinstating their 401(k) match may also want to consider examining their retirement plan as a whole and implementing other changes.

Benchmark Your Plan

Compare your retirement plan and your proposed match percentage to other companies of similar size, region and industry. If you find your offering is not competitive compared to other companies, you may want to rethink your plan. Or, if your match is much more attractive than your competitors, be sure to emphasize that advantage in your recruiting and retention efforts.

Choose Your Match Strategically

Studies show that employees tend to decide their contribution amount based on their employer’s “match ceiling” – that is, in a firm that matches up to 6 percent, many employees will choose 6 percent as their contribution amount. To encourage your employees to save as much as possible, consider setting your match ceiling higher than before. One way to do this is to switch to a 50 percent match for a higher percentage. For example, if you previously matched up to 3 percent, switch to a 50 percent match on up to 6 percent contributions. This would encourage employees to contribute twice as much – without costing you more.

Change Plan Provisions

Now is a great time to examine your plan and consider making changes. Talk to employees about their wants and needs, and analyze current plan usage among various employee demographics. You may want to add one or more of these components to make your plan more attractive to employees:

  • Automatic enrollment (if you already use it, you could start automatically raising participants’ contribution levels each year, encouraging employees to gradually save more)
  • Target-date or managed accounts (for employees with minimal expertise or interest in managing their own investments)
  • Roth 401(k) option
  • A longer vesting period or increased matching rates based on service time (to improve retention)
  • Increased employee investment education, such as personal consultations with a financial advisor or group learning sessions

Communicate Changes

When reinstating your match and implementing other changes into your plan, effective employee communication is essential. Give employees advance notice of these changes so they have ample time to allocate more money to save each month. Reinstating your match will get your employees’ attention, so take advantage of that opportunity to promote other aspects of your plan and educate employees as much as possible on their options. If any changes could be viewed in a negative light, explain your reasoning behind it – but be sure to emphasize all the positive features of your plan.

EEOC Updates Age Discrimination Guidelines for Employers

Tuesday, May 8, 2012 Posted by bcspec

On April 23, 2012, the Equal Employment Opportunity Commission (EEOC) issued a final rule regarding age discrimination under the Age Discrimination in Employment Act (ADEA). The final rule amends the guidelines for a “reasonable factors other than age” (RFOA) defense for employers faced with a disparate-impact age discrimination claim.

The final rule became effective on April 29, 2012, and imposes new and more stringent requirements for employers attempting to use the RFOA affirmative defense.

ADEA DISPARATE-IMPACT CLAIMS

According to the ADEA, employers may not discriminate against prospective or current employees over the age of 40 on the basis of hiring, promotion, discharge and compensation, or terms, conditions, or privileges of employment. The ADEA prohibits both intentional discrimination and the adoption of seemingly neutral practices that have a disparate impact on older workers.

Older workers affected by an employment practice that has a significant disparate impact on members of their age group may bring an age discrimination claim against their employer. Any employment practice that adversely affects individuals within the protected age group on the basis of older age is discriminatory unless the practice is justified by a ‘‘reasonable factor other than age.’’ An individual challenging the employment practice must identify the specific employment practice that allegedly caused the disparity.

RFOA AFFIRMATIVE DEFENSE

An employer that is subject to a disparate-impact claim may use an affirmative defense that its employment decision was based on reasonable factors other than age.  The final rule clarifies what factors may be considered reasonable and is intended to provide guidance about the application of the RFOA affirmative defense.

The EEOC uses specific criteria to examine whether a practice is based on a reasonable factor other than age. These criteria include, but are not limited to:

  • Whether the factor is related to the employer’s stated business purpose;
  • Whether the employer defined the factor accurately and applied the factor fairly and accurately, including whether managers and supervisors were given guidance or training about how to apply the factor and avoid discrimination;
  • Whether the employer limited supervisors’ discretion to assess employees subjectively, particularly where the criteria that the supervisors were asked to evaluate are known to be subject to negative age-based stereotypes;
  • Whether the employer assessed the adverse impact of its employment practice on older workers; and
  • The degree of the harm to the individuals within the protected age group, in terms of both extent of injury and the numbers of persons adversely affected, and the extent to which the employer took steps to reduce the harm, in light of the burden of undertaking such steps.

The employer’s affirmative defense does not have to be based on a specific factor or combination of factors for a differentiation to be based on reasonable factors other than age. In addition, the existence of a specific factor does not automatically prove the employer’s defense.

The EEOC has stated that, given the context-specific nature of the RFOA inquiry, it is not possible to specify every type of relevant evidence that would demonstrate the existence of one or more of these factors. Instead, all relevant evidence should be considered and what is considered relevant will vary according to the facts of each particular situation.

MORE INFORMATION

For more information regarding this EEOC Final Rule, please visit the Q&A section of the EEOC’s website about the ADEA final rule. For a copy of the final rule, see www.gpo.gov/fdsys/pkg/FR-2012-03-30/pdf/2012-5896.pdf.

Employee Handbook Checklist (In Handbook Order)

Tuesday, May 8, 2012 Posted by bcspec
Policy Title and Description Needs to be altered by each employer Check for state-specific content
Welcome and Purpose — This document introduces readers to the handbook and informs them that following handbook policies is a condition of employment, but that the relationship is at-will.
At-Will Employment Statement — This document explains that employment can be terminated by either party at any time, and that there should be no illusion of a contractual agreement between employees and the Company. X
Mission Statement — This document explains the Company’s mission, details how superior employees are selected and gives an overview of how the Company intends to fulfill its mission. X
Employment Termination — This policy explains the different circumstances under which an employee may be terminated (resignation, termination or layoff), provides notice period expectations for employees who choose to resign, and details other situations that may result in termination. X
Equal Employment Opportunity — This policy explains that the Company provides an equal employment opportunity to all individuals and values a diverse workforce.
I-9 Immigration Reform — This policy explains that the Company will only employ persons who are legally eligible to work in the United States, in compliance with the Immigration Reform and Control Act of 1986.
Code of Ethics Policy — This policy informs the employee of the Company’s Code of Ethics; it goes into detail on the Company’s prohibition of improper payments, political contributions, reporting to management, antitrust laws and exchange of information with competitors. X
Complaint Policy — This document explains the Company’s goal to have open communication with employees and, with that, details how employees should go about voicing complaints or grievances.
Disciplinary Action Policy — While each employee’s relationship with the Company is at-will, and a disciplinary procedure is not followed in all circumstances, the Disciplinary Action policy explains the Company’s basic approach to discipline.
Drug-free Workplace Policy —This policy explains the Company’s expectation that employees will not be under the influence of drugs or alcohol while working. It also details that any employee who is convicted under any criminal drug statutes for a violation occurring while he or she was working must notify the Company within five days of the conviction. X
Harassment Policy — This document details that the Company will not tolerate harassment of any kind, including harassment related to any characteristics that are protected under law, and that the policy applies to all persons involved with the Company in some way.
Sexual Harassment Policy — This document explains that the Company will not tolerate sexual harassment, and that the policy applies to all persons involved with the Company in any way. X
Standards of Conduct — This document provides employees with a list of examples of behaviors prohibited by the Company that will result in disciplinary action.
Violence in the Workplace — This policy makes clear the Company’s stance on violence; neither violence or threats of violence will be tolerated.
Weapons in the Workplace — This policy explains that weapons are prohibited on Company property and business, and that the policy applies to all individuals, even those who are licensed to carry weapons. X
Workplace Bullying — This document explains the Company’s goal of providing a safe and healthy work environment for all employees, and that, because of this, the Company prohibits bullying of all kinds.
COBRA Benefits — This policy gives an overview of the Company’s compliance with the Consolidated Omnibus Budget Reconciliation Act of 1985, P.L. 99 272, and later amendments, otherwise known as COBRA. X
Employer-offered Insurance — This document explains that the Company provides group insurance plans to full-time employees and provides an overview of how the costs are shared (the percentage the employer pays versus the percentage the employee pays). X X
Employment Taxes & Voluntary Deductions — This document details the deductions that will come out of each employee’s paychecks. In addition to taxes, this includes the optional deductions for benefit coverage, of which a portion will be paid by the employer. X
Communicable Disease Policy — This policy explains the procedure for dealing with communicable diseases in the workplace. It defines “communicable disease” and explains that the Company does not discriminate against individuals with communicable diseases.
Contagious Illness Policy — This policy explains that the Company’s goal is to maintain a healthy workplace for all persons, and in order to do so the Company evaluates contagious illnesses to determine whether or not an employee with a contagious illness will pose a threat to the health of himself or herself, other employees or customers. X
Federal Family and Medical Leave Policy — This document explains the Family and Medical Leave Act (FMLA).
Funeral Leave — This policy briefly explains that the Company understands that employees need time to grieve in the event of the death of an immediate family member, and therefore offers up to three days off of work for this purpose, up to and including the day of the funeral. X
Jury Duty — This policy explains that the Company will pay the difference between jury duty pay and regular wages for days that employees are unable to report to work due to jury service, as long as the employee has been employed by the Company for at least 90 days prior. X
Lunch and Rest Periods — This document explains the amount of time allotted to employees for lunch breaks and rest periods, and also that these breaks are unpaid. X X
Military Leave — This policy explains that the Company provides military leave to servicemembers, and details that the employee will not be required to use vacation time for military duty (training or service), but if he or she chooses to, the full regular vacation pay will be received. X
Nursing Mothers — This policy explains the Company’s commitment to providing lactation accommodation to mothers returning to work following the birth of a child. X
Paid Time Off — This policy details the amount of paid time off (PTO) that employees are eligible to earn each month, based on their status (full- or part-time). X
Pandemic Flu Leave — This policy explains that in the case of a pandemic flu outbreak, all employees who are absent due to a confirmed pandemic flu infection will receive full pay for their normally scheduled hours until a physician has authorized their return to work, as long as written documentation of the infection is provided by the physician.
Parental School Leave — This document explains that, because the Company understands the value of parental involvement with a child’s education, employees are allowed to use a portion of their allotted sick leave annually to attend school functions or activities related to their children’s education, as long as prior notice is provided. X X
Religious Observances — This policy explains the respect that the Company has for the individual beliefs of all employees, and that, because of this respect, one day of paid leave is provided annually to employees who have religious obligations on days of operation. X X
Sick Time — This policy details the definition of sick time, how it is accrued, and how employees should provide notice to the Company if they will be absent due to illness or medical reasons. X X
Time Off to Vote — This policy explains that because the Company encourages all of its employees to vote, time off to vote is provided when the employee would otherwise not have enough time before or after work to do so. X X
Vacation Policy — This policy details how vacation time is accrued, how employees should request to use their vacation time and how multiple, simultaneous, leave requests within a department will be handled. X X
Emergency Action Plan — This document details the Company’s procedures in different types of emergency situations (fire, medical, violence, etc.). X
Facility Access & Visitors — This document explains the Company’s goal of maintaining maximum security and safety at a minimum inconvenience to employees. It details the guidelines that help to maintain this safety and security, including the requirement that visitors be escorted by authorized personnel at all times, and that only certain doors are unlocked at specific times. X
General Computer Usage Policy — This policy explains the importance of safeguarding corporate information assets, and the guidelines for Company computer use.
Recording Devices Prohibited — This document explains that the use of all types of recording devices (including camera phones) is prohibited on Company property or during working hours unless specifically permitted by the Company.
Anti-discrimination Policy — This policy explains that the Company does not discriminate against any protected traits, or allow discrimination of any kind in the workplace.
Attendance & Standard Working Hours — This policy explains the Company’s expectation that employees must be regular and punctual in attendance due to absenteeism and tardiness placing a burden on the Company and its employees. X X
Background Check Policy — This policy explains that the Company performs background checks as part of ensuring that quality employees who have performed well in the past are hired. X
Business Expense Reimbursement Policy — This policy explains that the Company will reimburse employees for necessary and reasonable travel expenses related to the normal conduct of business. X
Company Car Policy — This policy details the provision of Company cars for business use to certain employees, upon approval.
Company Credit Card Policy — This policy explains the guidelines for use of a Company credit card, and why the cards are provided to certain employees. X
Confidential Information & Company Property — This document details the importance of protecting the Company’s confidential information and property, and the guidelines for doing so.
Conflicts of Interest — This document explains that employees should always act with the Company’s best interest in mind, and should not put themselves in a situation that conflicts with the Company’s best interest.
Customer Complaint Policy — This policy details the customer complaint process and how such complaints should be handled by the Company and its employees. X
Dress Code (General) — This document explains the Company’s general dress code and reasoning behind it.
Dress Code (Summer) — This document explains the option of a summer dress code that is more casual than the general dress code, that is available to employees between Memorial Day and Labor Day.
Driving While on Company Business — This policy sets the expectations for employee behavior while driving on Company business.
Educational Assistance Program — This document explains the Company’s Educational Assistance Program that reimburses employees for costs associated with furthering their education, assuming that the courses will assist the employees in performing their current job functions, or will help them along their intended career path within the Company. X
Employee Classification — This document lists the different classifications of employees and the criteria for each one. X
Employee Fraternization Policy — This policy sets the boundaries for employee fraternization, and explains the behavior expectations for employees regarding personal and/or romantic interactions between employees in the workplace.
Employee Discount Policy — This basic policy explains the discount offered to employees of the Company and what the discount can be used for. X
Employee Referral Bonus Policy — This policy explains that the Company provides a bonus to employees who refer candidates that end up being hired. X
Employment of Relatives Policy — This policy details that hiring and/or promotion decisions must take into account that immediate family members may not have a direct supervisor-subordinate relationship, create an adverse effect on work performance or create a conflict of interest.
Improper Payments & Gifts Policy — This policy explains the Company’s prohibition of payments or gifts that might be reasonably expected to interfere with the exercise of independent and objective judgment in making or participating in business decisions.
Injury & Illness Reporting Policy — This document explains the importance of and expectation that employees will immediately report work-related injuries and illnesses to the Company.
Media Relations Policy — This policy details the procedure for responding to media inquiries, and also explains who is authorized to provide statements to the media regarding Company business. X
Online Social Networking Policy — This policy explains that employees must be careful to protect the Company’s reputation in their use of online social networking sites.
Open Door Policy — This document explains that the Company encourages open communication between employees and management, and that concerns should be voiced so that a resolution may be agreed upon.
Orientation Period — This document explains the orientation period (the first 90 days of employment) in which employees undergo training and are directed by their supervisors.
Overtime Pay — This policy explains how employees are compensated for hours worked in excess of 40 hours each week, and which employees are eligible to receive overtime pay. X
Pay Periods & Check Distribution — This document explains when and how employees will be paid, including in the case of special circumstances like holidays or work absences. X X
Performance Evaluation Policy — This policy explains that management will provide ongoing performance feedback to each employee, and may, at times, perform formal performance evaluations.
Personnel Records Policy — This document details the content that employee personnel files contain and the employee’s responsibility for keeping pertinent information up to date with the Company. X
Phone Call Policy — This document explains that the Company provides phones to employees for business use, and details appropriate use of Company phones.
Physical Examination Policy — This policy explains that, at times, the Company requires mandatory, job-related medical examinations in order to ensure that employees can physically perform the mandatory functions of their jobs. X
Safety Policy — This policy reminds employees that it is important to refrain from horseplay, careless behavior and negligent actions in order to maintain a safe and secure working environment, and also emphasizes the importance of reporting accidents promptly and thoroughly if they do happen.
Severe Weather Policy — This document explains the Company’s policy in the case of severe weather, and the procedure for informing employees if the Company will be closed in such circumstances. X
Smoke-free Environment Policy — This document explains that the Company is a smoke-free environment and that smokers must observe the same guidelines as non-smokers regarding the frequency and length of break periods. X X
Social Functions Policy — This policy sets the guidelines for employee behavior at Company social functions, and also gives examples of the types of social functions that may occur.
Solicitations, Distributions & Use of Bulletin Boards — This document explains that employees have the option of communicating with their co-workers about non-work events, fundraisers, etc. through the use of Company bulletin boards. X
Time Card Regulations — This document explains the requirement that employees accurately maintain time cards to track their hours, and should not punch in or out for another employee. X
Workers’ Compensation Policy — This document details the Company’s policy regarding workers’ compensation, and the necessary tasks employees must complete in order to ensure that the proper workers’ compensation is paid to them. X

Additional Employee Policies Not Included in the Standard Employee Handbook

(In Alphabetical Order)

Policy Title and Description Needs to be altered by each employer Check for state-specific content
Alternative Working Schedules Policy — This policy explains the alternative schedule options available to employees whose lives do not allow a standard working schedule. These options include flex-time, ten-hour day with four-day workweek, and nine-hour day with one day off every other week.
Diversity Policy — This document explains that the Company encourages and welcomes diversity, recognizing it as a key competitive advantage.
Domestic Partnership Policy — This policy explains that the Company promotes acceptance of diversity, specifically in regard to sexual orientation, and, because of this, provides the same benefits to registered domestic partners and their families as it does to legally married individuals and their families. X
Employer-provided Mobile Devices Policy — This document explains the guidelines for using employer-provided mobile devices, and explains which employees are generally provided such mobile devices.
Flextime Policy — This document explains the Company’s use of flextime, which allows employees to determine their own work schedule as long as they are present between certain hours of the day.
Internal Transfer or Promotion Policy —This policy explains that movement and advancement within the company is encouraged, employees may be transferred or promoted at times, and that moves within the company may be management- or employee-initiated.
Salary Advance Policy — This document explains that the Company may be willing to grant a salary advance to an employee in an emergency situation, and details the stipulations of salary advances. X X
Smoke-free Incentive Policy — This policy explains that the Company provides a discount on medical insurance to employees who do not use tobacco products. X

IRS COBRA Audit Guidelines

Monday, May 7, 2012 Posted by bcspec

In March 2012, the Internal Revenue Service (IRS) published its revised audit guidelines for COBRA audits. The revised guidelines are the result of a 10-year task force review. The publication of these guidelines suggests that the IRS is increasing its focus on COBRA compliance.

Employers should review their COBRA procedures for compliance with the law’s requirements to be prepared in the event they are selected for an audit. The IRS guidelines indicate how an auditor might determine compliance.

BACKGROUND

The IRS appointed a task force in 1993 to address questions and concerns from field personnel on health benefits provided under COBRA. The purpose of the task force was to provide IRS examiners with procedural guidelines to conduct COBRA examinations and compliance checks.

In 2002, a second task force was convened to revise the original guidelines to incorporate operational changes at the IRS and legislative changes, such as the enactment of the Health Insurance Portability and Accountability Act (HIPAA) and the Family and Medical Leave Act (FMLA).

GENERAL COBRA REQUIREMENTS

The revised guidelines contain definitions related to COBRA coverage and a basic description of several COBRA requirements. These include the notices that must be provided to covered employees and their families and the period of time during which a qualified beneficiary must be allowed to elect COBRA coverage.

The guidelines also describe the type of coverage that must be provided and the length of the coverage period. Premium requirements for COBRA coverage are also discussed in the guidelines, along with special rules related to COBRA coverage for retirees and employer bankruptcy.

Examination Procedures

The audit guidelines outline how the examiner should determine if an employer who is subject to COBRA has violated any of the law’s requirements. The guidelines indicate that the examiner should review the employer’s COBRA procedure and obtain the following information:

  • A copy of the COBRA coverage procedures manual;
  • Copies of standard COBRA coverage form letters sent to qualified beneficiaries;
  • A copy of the employer’s internal audit procedures for COBRA coverage;
  • Copies of all group health care plans; and
  • Details regarding any past or pending lawsuits filed against the employer for failing to provide appropriate continuation coverage.

The guidelines indicate that the examiner may wish to investigate specific areas for noncompliance, based on the procedures that are in place. This investigation could involve interviews of responsible parties regarding the following topics:

  • The number of qualifying events occurring in the year under examination through the current date;
  • The method by which qualified beneficiaries are notified of their rights to continuing health care coverage under COBRA;
  • The method by which the plan administrator is notified that a qualifying event has occurred;
  • The election made by qualified beneficiaries to continue health care coverage; and
  • The premium paid by qualified beneficiaries for COBRA coverage.

As part of an audit, an examiner may also request the following documents:

  • Copies of federal and state employment tax returns filed during the current period under examination and the preceding year;
  • A list of all individuals affected by a qualifying event during the current year;
  • A list of all individuals covered on the first and last days of the current and preceding years for each plan; and
  • Individual personnel records with specific COBRA information to confirm whether qualified beneficiaries were properly provided with COBRA coverage and to determine when any excise tax computation should begin.

If an employer denies COBRA coverage based on the employee’s termination for gross misconduct, the guidelines suggest that the examiner should check to see if the covered employee was denied unemployment benefits for the same reason. In a multi-employer plan, if a grievance for gross misconduct was arbitrated independently under the union agreement, the decision may help with the determination. If the employer lost in the grievance process, this may indicate a failure to comply with COBRA law requirements.

PENALTIES

The COBRA provisions in the Internal Revenue Code consist of operating requirements that specify what an employer/plan administrator and its group health plans must do to be in compliance and tax sanctions that may apply to non-compliant employers. Other potential liabilities related to COBRA violations include ERISA statutory penalties, lawsuits to compel coverage and adverse selection of COBRA coverage.

Penalty Amount

The IRS’s revised guidelines include a section regarding the excise tax penalties that may be imposed for Internal Revenue Code violations. The excise tax amount is $100 per qualified beneficiary (but no more than $200 per family) for each day of the noncompliance period.

Noncompliance Period

The noncompliance period begins on the date the failure to comply takes place. Depending on the circumstances, this might be the first date that coverage is denied, the date that a notice is not sent out as required, or some other date.

The noncompliance period generally ends on the date the violation is corrected. However, even if the failure is not corrected, it will end six months after the last date on which continuation coverage would have been required for the particular qualified beneficiary.


Exceptions

There are situations where an excise tax might not be imposed. The excise tax cannot be imposed if none of the parties subject to the tax knew, or would have known by exercising reasonable due diligence, that the failure existed. However, the noncompliance period would begin when the responsible person became aware or should have been aware of the noncompliance. Also, the exception does not apply where the failure is not corrected before the employer is notified of an income tax examination.

The excise tax generally does not apply to a violation if it is due to reasonable cause and not to willful neglect and it is  corrected within 30 days after it is discovered, or would have been discovered, exercising reasonable due diligence. In addition, the IRS may waive the penalty if the violation is due to reasonable cause and not to willful neglect and the tax would be unreasonably burdensome.

New Participant Disclosure Requirements for Retirement Plans

Friday, May 4, 2012 Posted by bcspec

The Department of Labor (DOL) issued a final rule creating new participant disclosure requirements for the administrators of participant-directed retirement plans. According to the DOL, current law does not adequately ensure that workers who make their own retirement plan investments are given the information that they need to make these important decisions.

The final rule expands ERISA’s fiduciary duty requirements for participant-directed retirement plans. It requires administrators of these plans to disclose, on a regular and periodic basis, certain fee, expense and other information regarding plan investments and participants’ rights to direct their plan investments.

Plan administrators should be preparing to comply with the new disclosure requirements. For calendar year plans, the first annual disclosures will be required by Aug. 30, 2012.

For a copy of the final rule, see https://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=24323.

which retirement plans are affected?

The new disclosure requirements affect participant-directed individual account plans. A participant-directed plan is a retirement plan that allocates investment responsibilities to participants or beneficiaries. Thus, participant-directed 401(k) plans, certain 403(b) plans and other tax-qualified defined contribution plans are subject to the participant disclosure requirements.

Also, these disclosures are not limited to the administrators of ERISA section 404(c) plans. Unlike ERISA section 404(c) compliance, which is voluntary, administrators of participant-directed plans must comply with these new disclosure requirements or risk violating their fiduciary duties.

Simplified employee pension plans (SEPs), SIMPLE retirement accounts and governmental plans are not subject to the new participant disclosure requirements.

what are the required disclosures?

The final rule requires plan administrators to provide participants with two types of information, plan-related information and investment-related information.

Plan-Related Information

Plan-related information consists of the following three types of information:

  • General plan information;
  • Administrative expense information; and
  • Individual expense information.

General plan information includes information about the structure and mechanics of the plan, such as an explanation of how to give investment instructions under the plan, a current list of the plan’s investment options and a description of any “brokerage windows” or similar arrangement that enables the selection of investments beyond those designated by the plan.

Administrative expense information means an explanation of any fees and expenses for general plan administrative services that may be charged to or deducted from all individual accounts. Examples include fees and expenses for legal, accounting and recordkeeping services.

Individual expense information includes an explanation of any fees and expenses that may be charged to or deducted from the individual account of a specific participant or beneficiary based on the actions taken by that person. Examples include fees and expenses for plan loans and for processing qualified domestic relations orders.

This plan-related information must be given to participants on or before the date they can first direct their investments. After the initial disclosure, it must be provided on an annual basis.

In addition to the plan-related information that must be furnished up front and annually, participants must receive statements, at least quarterly, showing the dollar amount of the plan-related fees and expenses (whether administrative or individual expenses) actually charged to or deducted from their individual accounts, along with a description of the services for which the charge or deduction was made. These specific disclosures may be included in quarterly benefit statements required under section 105 of ERISA.

Investment-Related Information

Investment-related information includes several types of core information about each investment option under the plan, as described below.

  • Performance Data – Participants must be provided specific information about historical investment performance. For investment options that do not have fixed rates of return, such as mutual funds, 1-, 5- and 10-year returns must be provided. For investment options that have a fixed or stated rate of return, the annual rate of return and the term of the investment must be disclosed.
  • Benchmark Information – For investment options that do not have a fixed rate of return, the name and returns of an appropriate broad-based securities market index over 1-, 5- and 10-year periods (matching the performance data periods) must be provided. Investment options with fixed rates of return are not subject to this requirement.
  • Fee and Expense Information – For investment options that do not a have a fixed rate of return, the total annual operating expenses expressed as both a percentage of assets and as a dollar amount for every $1,000 invested, and any shareholder-type fees or restrictions on the participant’s ability to purchase or withdraw from the investment. For investment options that have a fixed rate of return, any shareholder-type fees or restrictions on the participant’s ability to purchase or withdraw from the investment.
  • Internet Website Address – Investment-related information includes an Internet website address that is sufficiently specific to provide participants and beneficiaries access to specific additional information about the investment options for workers who want more or more current information.
  • Glossary – Investment-related information includes a general glossary of terms to assist participants and beneficiaries in understanding the plan’s investment options, or an Internet website address that is sufficiently specific to provide access to such a glossary.

Investment-related information must be furnished to participants or beneficiaries on or before the date they can first direct their investments. After the initial disclosure, it must be provided on an annual basis.

It also must be furnished in a chart or similar format designed to facilitate a comparison of each investment option available under the plan. The final rule includes, as an appendix, a model comparative chart, which when correctly completed, may be used by the plan administrator to satisfy the rule’s requirement that a plan’s investment option information be provided in a comparative format. The model chart is available through the DOL’s website at: www.dol.gov/ebsa/compliance_assistance.html#section3.

Other Requirements

After a participant has invested in a particular investment option, he or she must be provided with any materials the plan receives regarding voting, tender or similar rights in the option. Upon request, the plan administrator must also furnish prospectuses, financial reports and statements of valuation and of assets held by an investment option.

The final rule provides plan administrators protection from liability for the completeness and accuracy of information provided to participants if the plan administrator reasonably and in good faith relies upon information provided by a service provider.

The final rule also makes similar changes to the disclosure requirements for plans that elect to comply with ERISA section 404(c).

when do the new requirements become effective?

The DOL aligned the effective dates for the participant disclosure requirements and the new fee disclosure requirements for retirement plan service providers, so that the participant disclosures would become effective after the service provider disclosures go into effect. The service provider disclosure requirements go into effect on July 1, 2012.

The initial participant disclosures must be furnished by 60 days after the first day of the plan year beginning on or after Nov. 1, 2011, or 60 days after the effective date of the service provider disclosure rule (that is, Aug. 30, 2012), whichever is later. The final rule’s quarterly disclosures must be furnished no later than 45 days after the end of the quarter in which the initial disclosures are required to be provided to participants and beneficiaries.

Thus, administrators for calendar year plans must provide:

  • The initial annual disclosure of plan-level and investment-level information (including associated fees and expenses) to participants no later than Aug. 30, 2012; and
  • The first quarterly statements no later than Nov. 14, 2012 (that is, 45 days after the end of the third quarter during which initial disclosures were first required). This first quarterly statement must reflect only fees and expenses actually deducted from the participant’s account during the July through September quarter.

Source: DOL, Employee Benefits Security Administration

Employee Benefit Plan Audits: Common Mistakes

Thursday, May 3, 2012 Posted by bcspec

Employee Benefit Plan Audits: Common Mistakes

Employee benefit and retirement plans are required to comply with a number of complex laws and regulations, and failure to do so can result in significant penalties.

Employee Benefit Plan Audits

The Department of Labor (DOL) requires many employee benefit plans – generally those with 100 or more participants – to have an audit each year as part of their obligation to file an annual Form 5500 report. Inconsistent findings in this audit and report can raise red flags with the DOL and may prompt further examination.

In addition, the DOL conducts its own benefit plan audits, either randomly, due to an employee complaint or as a result of inconsistencies in the Form 5500 report. The DOL may levy fines for any inaccuracies or noncompliance issues.

Avoid Common Errors

There are countless infractions that an audit could uncover, some deliberate and some inadvertent. However, according to one CPA in a recent Employee Benefit News article, there are three mistakes that plan sponsors commonly make.

Incorrectly defining compensation. This error is one of the most common and can be tricky and/or costly to correct. It often occurs when a plan sponsor fails to read the entire plan document – or reads it once but never refers back.

There are many different types of compensation – base pay, overtime, vacation, bonuses, fringe benefits, etc. – made even more complicated by different definitions of compensation regarding employee deferrals, employer match contributions and profit-sharing contributions. If the proper definition of compensation isn’t used when contributions are made, your plan is out of compliance and must be corrected.

This issue can easily be avoided by reading and understanding your plan document, and referring to it regularly if have a question. Plan sponsors must give this issue consistent attention to ensure their plan’s compliance.

Not following plan eligibility requirements. There are four general ways that plan sponsors fail to properly follow their plan’s eligibility requirements:

  • Allowing participants that should be excluded per plan requirements.
  • Allowing participants into the plan prior to meeting eligibility requirements.
  • Not allowing eligible participants into the plan (or not allowing them in on a timely basis).
  • Not following eligibility rules regarding elective deferrals and company match or profit-sharing contributions.

Plan sponsors should be familiar with their plan’s eligibility requirements and periodically audit themselves to ensure provisions are being followed.

Late deposit of funds. Employee deferrals and loan payments must be deposited into the plan as soon as administratively possible, but no later than the 15th business day of the month following the month in which the participant contributions are received or withheld.

Many companies make the mistake of relying on the “15 days” – but that time period is not a safe harbor. Plans are required to make those deposits as soon as administratively possible, so do not assume you have a 15-day grace period – you can still be penalized if the DOL determines you could have made deposits in a more timely manner.

The Department of Labor may levy fines or penalties for any inaccuracies or noncompliance issues discovered in an employee benefit plan audit.

Health Care Reform: Supreme Court Hearing Scenarios

Wednesday, May 2, 2012 Posted by bcspec

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At the end of March, the U.S. Supreme Court heard six hours of oral arguments regarding the health care reform law. At the center of the debate was the law’s individual mandate, which, beginning in 2014, will require all individuals to purchase health care insurance or pay a penalty.

Opponents of the law argue that an individual mandate is unconstitutional because it forces people to engage in commerce. Proponents maintain that health care is distinguished from other forms of commerce in that the health care costs associated with the uninsured impact everyone and demonstrate the economic effects of not purchasing health coverage. The Justices are expected to release their decision sometime in June. Though difficult to predict, some potential outcomes include:

  • The Justices may decline to review the law, believing that the challenge is premature because the mandate has not taken effect.
  • The Court may deem the law completely constitutional and uphold the entire law, allowing the changes to take effect in 2014.
  • If the Court determines that the individual mandate is unconstitutional and an integral part of the law, they may strike it down completely.
  • In a ruling that would likely see prices skyrocket, the Justices could determine that the individual mandate is unconstitutional and strike it down, leaving the rest of the law intact.
  • Fearing the potential impact of striking down only the individual mandate, the Justices may choose to strike down the individual mandate and related provisions.

This decision will have far-reaching effects on the health care industry. Benefit & Compensation Specialists, PLLC will monitor the law’s status and provide updates as information becomes available.