With all of the energy being spent on the Affordable Care Act, it is possible that some rules and requirements slip through the cracks. It is as important as ever to make sure employers sponsoring group health plans continue to satisfy all plan obligations.
In a recent case, the U.S. District Court Eastern District of Tennessee imposed a penalty of $61,380 against a plan sponsor for failure to furnish a copy of a plan document after repeated requests for the document by the participant/plaintiff, plus an additional $12,760 for failure to provide a copy of a life insurance policy when requested [Harris-Frye v. United of Omaha Life Ins. Co., No. 1:14-cv-72 (E.D. Tenn. Sept. 21, 2015)].
This case is a good reminder of the importance of complying with all standards applicable to welfare and retirement benefit plans subject to ERISA, as well as the Affordable Care Act.
Welfare and retirement benefit plans subject to ERISA must be established and maintained pursuant to a written plan document that describes the benefits provided under the plan, names the individuals responsible for the operation of the plan, and outlines the arrangements for funding and amending the plan. The purpose of the plan document is to set forth the rules and requirements governing the plan. The plan sponsor is obligated to follow the terms and conditions of the plan, as long as the plan is compliant with the law.
While there is no obligation to provide plan participants and beneficiaries a copy of the plan document, ERISA requires that if the plan document is requested by a plan participant or beneficiary, the document must be made available within 30 days of the request. The penalties for failure to provide a copy of the plan document within 30 days of the request could result in penalties of up to $110 per day from the date of such failure, as reflected in the Harris-Frye matter mentioned above.
In addition, plans are required to provide a summary of the provisions contained in the plan document, including details about eligibility, benefits, plan operations, funding, claims procedures, and a statement of ERISA rights. This summary plan description (SPD) must be provided to all plan participants. If any changes are made to the plan that affect the information in the SPD or materially affect the plan, then a summary of material modification (SMM) describing the change must be provided to participants. However, if a health plan modification would result in a material reduction in benefits, then participants must be given an SMM describing the change within 60 days of the adoption of such change. ERISA further requires plans filing the Form 5500 to provide a summary of information contained in that filing to plan participants; this document is known as a Summary Annual Report.
Additional disclosures by the plan sponsor could include:
- COBRA notifications such as the initial general notice of COBRA rights, the COBRA election notice, and if applicable, a notice of ineligibility, a notice of early COBRA termination and notice of any available conversion option;
- An initial and annual Women’s Health and Cancer Rights Act notice;
- The Newborns’ and Mothers’ Health Protection Act notice;
- If the health plan includes a wellness component, a notice describing reasonable alternative standards;
- An annual Medicaid/CHIP premium assistance notice;
- An initial Notice of Privacy Practices plus triennial reminder notification by covered entities subject to the HIPAA privacy and security rules; and
- If the group health plan provides prescription drug benefits, an annual Medicare Part D creditable or non-creditable coverage disclosure notice.
Plans subject to the Affordable Care Act (ACA) have additional disclosure obligations, including:
- Notification of grandfathered health plan status, if applicable;
- Notice of marketplace options;
- Summary of benefits and coverage;
- Advanced 60-day notice of material change in benefits, if applicable; and
- Notifications required under the ACA’s internal claims and appeals, and external review.
It is essential to make sure that all Is are dotted and all Ts are crossed when it comes to plan compliance.
The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.