“Compliance” and “audits” – two words that strike fear into most business leaders.
In addition to the more familiar rules related to financial disclosure and human resources practices, employers also have compliance requirements related to their employee benefit programs. Non-compliance can cost you significant financial pain and cause you and your team the major concern of spending precious time and resources to meet requirements after the fact.
When we talk to North Bay businesses, we ask them if they think their benefits program would pass a Department of Labor (DOL) audit.
Most of the time, they quickly – often incorrectly – answer, “Yes.”
To ensure that our customers and business partners are truly compliant, we perform a compliance audit or ask some clarifying questions. Nine times out of 10, our audit finds the answer is a resounding no. They are obviously non-compliant and would be challenged to pass a DOL audit.
A compliance caution
The biggest issue we see is the belief that when an employer implements an employee benefits program, their job ends. They think that at the end of the day, they are buying a product or plan from another company and paying the premium; what else should they do?
The truth is that there is a lot that employers need to do after implementing their benefits programs.
Unfortunately, we find that many brokers do not fully discuss compliance with their clients. These employers are unaware that they are vulnerable and only discover they are out of compliance too late when the DOL audits them.
Some key items (but not all) you need to ensure DOL compliance:
Section 125 Plan
Also known as a “cafeteria plan,” a Section 125 plan is a written document that offers employees the opportunity to contribute to certain benefits (eg, health insurance) on a pre-tax basis.
Summary plan description (SPD)
Unless your organization is a church or a government entity, your benefits program falls under the rules of the Employee Retirement Income Security Act (ERISA).
You, as the administrator, are required to own and distribute a summary description of the plan. In particular, ERISA mandates that an SPD be distributed to covered participants within 90 days after their coverage begins, or within 120 days of the creation of a new benefit program.
An updated SPD must be provided to all participants every five years.
Summary of Benefits and Coverage (SBC)
The Affordable Care Act (ACA) requires a summary of benefits and coverage be provided in the following circumstances:
- By application. If a plan or issuer distributes written application materials—including electronic formats—for enrollment, the SBC must be provided as part of those materials.
- Until the first day of coverage (if there is any difference). If there is any change in the information required to be on the SBC that is provided on the application and before the first day of coverage, the plan or issuer must update and provide a current SBC no later than the first day of coverage.
- Special registered. For employees who experience a qualifying event and enroll in the benefit plan, the SBC must be provided within the same time period as the SPD which is 90 days from enrollment.
- Under renovation. If, during an open enrollment period, a plan or issuer requires participants and beneficiaries to actively choose to maintain coverage, or gives them the opportunity to change coverage options, the plan or issuer must provide the SBC to the same time that distributes open registration Materials.
- Upon request. When an employee or other entity requests an SBC or summary information related to health coverage, it must be provided no later than seven business days after receiving the request.
Annual notices
These are required pieces of communication that contain information about an employee’s health benefit plan. Annual notices are designed to inform plan members of their rights, options and obligations. These notices include:
- Medicare Part D notice of creditable (or noncreditable) coverage.
- Children’s Health Insurance Program (CHIP) announcement.
- Women’s Health and Cancer Rights Act (WHCRA) Notice.
- Summary of Benefits and Coverage (SBC), as mentioned above.
Avoiding the risk of a DOL audit of your employee benefits program doesn’t have to be an overly complicated proposition.
Your broker can and should be your first resource to ensure you are in compliance. As we mentioned, we find that most employers who refer us assume they are compliant. But after asking a few questions, or conducting a thorough audit of their program, unfortunately, they often aren’t.
After reading just a few of what you need to be compliant, do you think you are? It’s not worth the risk of waiting for a DOL audit to find out.
