6 Questions to Ask When Approaching Benefits Renewal
Zack is senior vice president, benefits consulting at CBIZ, Inc. During his over 15 years in employee benefits, he has designed, implemented and managed benefits packages that enable employers to attract and retain the talent they need to outperform their competitors, while ensuring that each overall benefits program and its components are cost-effective. Connect with him on LinkedIn.
1. Will the return of the Affordable Care Act (ACA) premium tax affect your plan renewal?
This tax of about 4% (the health insurer provider fee) is under Congressional moratorium for 2019 but returns for 2020. Fully insured January 2020 medical, dental and vision renewals will be about 4% higher than they would have been otherwise. This tax does not, however, apply to most self-funded contracts, including so-called level-funded arrangements. Thus, if your plans are presently fully insured, now may be a good time to re-evaluate the pricing of self-funded plans.
2. Does your renewal timeline include all vendor decision deadlines?
As the benefits landscape continues to shift and more companies are carving out certain plan components, including the pharmacy benefit manager, you may be surprised with how early these vendors need decisions in order to accommodate benefit changes and plan amendments. Of note, it seems that HRIS and benefit administration platforms are asking for earlier decisions – even with technology seemingly improving. Check your contracts and consult with your benefits advisor.
3. Is your group life plan in compliance with the Section 79 nondiscrimination rules?
A myth that floats around is that the first $50,000 in group term life insurance benefits is always non-taxable. However, that’s only true if the plan passes the Section 79 nondiscrimination rules. Generally, as long as there isn’t discrimination in eligibility terms and the benefit is either a flat benefit or a salary multiple (e.g., $100,000 flat, 1 x salary to $250,000), the plan passes testing. Consult with your attorney, accountant and benefits advisor about this testing. If you have two or more classes for life insurance, the benefit is probably discriminatory. If you fail the testing, it just means that you’ll likely need to tax your Section 79-defined “key employees” on the entire benefit, not just the amount in excess of $50,000.
4. Is your group life maximum benefit higher than the guaranteed issue amount?
Plans where the employer-paid benefit maximum exceeds the guaranteed issue amount are still out there. Thus, certain highly compensated employees must undergo and pass medical underwriting in order to secure the full employer-paid benefit. As benefits managers turnover, this detail often is lost, and new hires are not told they need to go through underwriting to secure the promised benefit. As a result, for example, an employee may think he or she has $650,000 in benefit, while he or she only contractually has $450,000. This means the employer is unknowingly self-funding the difference. In this example, that’s $200,000!
Review your group life insurance certificate to confirm that the entire employer-paid benefit is guaranteed issue. If it is not, negotiate, change carriers or lower the benefit.
5. Is there any chance you’ve unintentionally disqualified participant HSAs?
Unintentional disqualification is not difficult. To check, first, ensure that the deductibles are equal to or greater than the 2020 IRS HSA statutory minimums and the out-of-pocket maximums are equal to or less than the 2020 IRS HSA statutory maximums. Remember, the IRS HSA maximum out-of-pocket limits are not the same as the ACA out-of-pocket maximum limits.
Additionally, remember that in order for a family deductible to have a compliantly embedded single deductible, the embedded single deductible must be equal to or greater than the statutory minimum family deductible. Also ensure that no individual in the family plan can be subject to an out-of-pocket maximum greater than the ACA statutory individual out-of-pocket maximum.
Finally, did you introduce any new standalone benefits for 2020, like a telemedicine program, that Treasury would consider “other health coverage”? If yes, you may want to reverse course before 2020; discuss this with your tax advisor, attorney and benefits consultant.
6. Have you reviewed your existing Wrap Document and Wrap Summary Plan Description and made any necessary amendments?
It’s easy to forget, depending on the preparer, how much detail is often in these documents – and it all should be reviewed. For example, if your vision vendor changes or even if just their address changes, an amendment is likely in order. Your attorney, benefits consultant and third-party administrators should be able to assist.