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The change in the regulations that would increase the salary threshold for overtime exemption that was all over the news for the last several months may now be decided by the end of June.

The Fifth Circuit Court of Appeals has granted the U.S. Department of Labor (DOL) another 60-day extension of time to file its final reply brief in the in the pending appeal of a nationwide injunction issued by a federal district court in Texas blocking implementation of the DOL’s final overtime rule. As we reported at the time, the final rule, which raised the salary threshold for the white collar overtime exemptions, was scheduled to go into effect on December 1, 2016. The final brief is now required to be filed by June 30, 2017. In its unopposed motion, the DOL stated that the extension was necessary “to allow incoming leadership personnel adequate time to consider the issues” and noted that the nominee for Secretary of Labor has not been confirmed.

As a result of the extension, it is not likely that employers will see any resolution of this issue until midsummer at the earliest. This also assumes that President Trump’s nominee for Secretary of Labor, Alexander Acosta, is confirmed within the next few weeks.

By Rick Montgomery, JD
Originally published by www.thinkhr.com

On April 4, 2017, the Department of Labor (DOL) announced that the applicability date for the final fiduciary rule will be extended, and published its final rule extending the applicability date in the Federal Register on April 7. This extension is pursuant to President Trump’s February 3, 2017 presidential memorandum directing the DOL to further examine the rule and the DOL’s proposed rule to extend the deadline released on March 2, 2017.

The length of the extension differs between certain requirements and/or components of the rule.  Below are the components and when and how applicability applies:

  • Final rule defining who is a “fiduciary”: Under the final rule, advisors who are compensated for providing investment advice to retirement plan participants and individual account owners, including plan sponsors, are fiduciaries. The applicability date for the final rule is extended 60 days, from April 10 until June 9, 2017. Fiduciaries will be required to comply with the impartial conduct or “best interest” standards on the June 9 applicability date.
  • Best Interest Contract Exemption: Except for the impartial conduct standards (applicable June 9 per above), all other conditions of this exemption for covered transactions are applicable January 1, 2018. Therefore, fiduciaries intending to use this exemption must comply with the impartial conduct standard between June 9, 2017 and January 1, 2018.
  • Class Exemption for Principal Transactions: Except for the impartial conduct standards (applicable June 9 per above), all other conditions of this exemption for covered transactions are applicable January 1, 2018. Therefore, fiduciaries intending to use this exemption must comply with the impartial conduct standard between June 9, 2017 and January 1, 2018 and thereafter.
  • Prohibited Transaction Exemption 84-24 (relating to annuities): Except for the impartial conduct standard (applicable June 9 per above), the amendments to this exemption are applicable January 1, 2018.
  • Other previously granted exemptions: All amendments to other previously granted exemptions are applicable on June 9, 2017.

By Nicole Quinn-Gato, JD
Originally published by www.thinkhr.com

On Friday, Republicans in the U.S. House of Representatives pulled pending legislation, known as the American Health Care Act, from further consideration. The bill had been scheduled for a vote on the House floor Friday afternoon but, recognizing that it was headed for defeat, the House leadership cancelled the vote.

It is now unlikely that Congress will pursue any legislation to repeal or replace the Affordable Care Act (ACA) this year. That does not mean, however, that we will not see changes in how the ACA is enforced. President Trump has directed the Departments of Labor (DOL), Treasury (including the IRS), and Health and Human Services (HHS) to review all existing regulations and to initiate steps to revise or eliminate burdensome rules. Congress also may use authority under the Congressional Review Act (CRA) to overturn, with a simple majority, certain regulations if they had been finalized only recently.

As the focus moves from the legislative to the regulatory arena, ThinkHR will continue to monitor and report on ACA developments that impact employers and their group health plans.

By Laura Kerekes
Originally published by www.thinkhr.com

Our Firm is making a big push to provide compliance assessments for our clients and using them as a marketing tool with prospects. Since the U.S. Department of Labor (DOL) began its Health Benefits Security Project in October 2012, there has been increased scrutiny. While none of our clients have been audited yet, we expect it is only a matter of time and we want to make sure they are prepared.

We knew most fully-insured groups did not have a Summary Plan Description (SPD) for their health and welfare plans, but we have been surprised by some of the other things that were missing. Here are the top five compliance surprises we found.

  1. COBRA Initial Notice. The initial notice is a core piece of compliance with the Consolidated Omnibus Budget and Reconciliation Act (COBRA) and we have been very surprised by how many clients are not distributing this notice. Our clients using a third-party administrator (TPA), or self-administering COBRA, are doing a good job of sending out the required letters after qualifying events. However, we have found that many clients are not distributing the required COBRA initial notice to new enrollees. The DOL has recently updated the COBRA model notices with expiration dates of December 31, 2019. We are trying to get our clients to update their notices and, if they haven’t consistently distributed the initial notice to all participants, to send it out to everyone now and document how it was sent and to whom.
  2. Prescription Drug Plan Reporting to CMS. To comply with the Medicare Prescription Drug Improvement and Modernization Act, passed in 2003, employer groups offering prescription benefits to Medicare-eligible individuals need to take two actions each year. The first is an annual report on the Centers for Medicare & Medicaid Services (CMS) website regarding whether the prescription drug plan offered by the group is creditable or non-creditable. The second is distributing a notice annually to Medicare-eligible plan members prior to the October 15 beginning of Medicare open enrollment, disclosing whether the prescription coverage is creditable or non-creditable. We have found that the vast majority (but not 100 percent) of our clients are complying with the second requirement by annually distributing notices to employees. Many clients are not complying with the first requirement and do not go to the CMS website annually to update their information. The annual notice on the CMS website must be made within:
  • 60 days after the beginning of the plan year,
  • 30 days after the termination of the prescription drug plan, or
  • 30 days after any change in the creditability status of the prescription drug plan.
  1. ACA Notice of Exchange Rights. The Patient Protection and Affordable Care Act (ACA) required that, starting in September 2013, all employers subject to the Fair Labor Standards Act (FLSA) distribute written notices to all employees regarding the state exchanges, eligibility for coverage through the employer, and whether the coverage was qualifying coverage. This notice was to be given to all employees at that time and to all new hires within 14 days of their date of hire. We have found many groups have not included this notice in the information they routinely give to new hires. The DOL has acknowledged that there are no penalties for not distributing the notice, but since it is so easy to comply, why take the chance in case of an audit?
  2. USERRA Notices. The Uniformed Services Employment and Reemployment Rights Act (USERRA) protects the job rights of individuals who voluntarily or involuntarily leave employment for military service or service in the National Disaster Medical System. USERRA also prohibits employers from discriminating against past and present members of the uniformed services. Employers are required to provide a notice of the rights, benefits and obligations under USERRA. Many employers meet the obligation by posting the DOL’s “Your Rights Under USERRA” poster, or including text in their employee handbook. However, even though USERRA has been around since 1994, we are finding many employers are not providing this information.
  3. Section 79. Internal Revenue Code Section 79 provides regulations for the taxation of employer-provided life insurance. This code has been around since 1964, and while there have been some changes, the basics have been in place for many years. Despite the length of time it has been in place, we have found a number of groups that are not calculating the imputed income. In essence, if an employer provides more than $50,000 in life insurance, then the employee should be paying tax on the excess coverage based on the IRS’s age rated table 2-2. With many employers outsourcing their payroll or using software programs for payroll, calculating the imputed income usually only takes a couple of mouse clicks. However, we have been surprised by how many employers are not complying with this part of the Internal Revenue Code, and are therefore putting their employees’ beneficiaries at risk.

There have been other surprises through this process, but these are a few of the more striking examples. The feedback we received from our compliance assessments has been overwhelmingly positive. Groups don’t always like to change their processes, but they do appreciate knowing what needs to be done.

Audit-proof your company with UBA’s latest white paper: Don’t Roll the Dice on Department of Labor Audits. This free resource offers valuable information about how to prepare for an audit, the best way to acclimate staff to the audit process, and the most important elements of complying with requests.

By Bob Bentley, Manager
Originally published by www.ubabenefits.com

Proposed regulations for revising and greatly expanding the Department of Labor (DOL) Form 5500 reporting are set to take effect in 2019. Currently, the non-retirement plan reporting is limited to those employers that have more than 100 employees enrolled on their benefit plans, or those in a self-funded trust. The filings must be completed on the DOL EFAST2 system within 210 days following the end of the plan year.

What does this expanded number of businesses required to report look like? According to the 2016 United Benefit Advisors (UBA) Health Plan Survey, less than 18 percent of employers offering medical plans are required to report right now. With the expanded requirements of 5500 reporting, this would require the just over 82 percent of employers not reporting now to comply with the new mandate.

While the information reported is not typically difficult to gather, it is a time-intensive task. In addition to the usual information about the carrier’s name, address, total premium, and payments to an agent or broker, employers will now be required to provide detailed benefit plan information such as deductibles, out-of-pocket maximums, coinsurance and copay amounts, among other items. Currently, insurance carriers and third party administrators must produce information needed on scheduled forms. However, an employer’s plan year as filed in their ERISA Summary Plan Description, might not match up to the renewal year with the insurance carrier. There are times when these schedule forms must be requested repeatedly in order to receive the correct dates of the plan year for filing.

In the early 1990s small employers offering a Section 125 plan were required to fill out a 5500 form with a very simple 5500 schedule form. Most small employers did not know about the filing, so noncompliance ran very high. The small employer filings were stopped mainly because the DOL did not have adequate resources to review or tabulate the information.

While electronic filing makes the process easier to tabulate the information received from companies, is it really needed? Likely not, given the expense it will require in additional compliance costs for small employers. With the current information gathered on the forms, the least expensive service is typically $500 annually for one filing. Employers without an ERISA required summary plan description (SPD) in a wrap-style document, would be required to do a separate filing based on each line of coverage. If an employer offers medical, dental, vision and life insurance, it would need to complete four separate filings. Of course, with the expanded information required if the proposed regulations hold, it is anticipated that those offering Form 5500 filing services would need to increase with the additional amount of information to be entered. In order to compensate for the additional information, those fees could more than double. Of course, that also doesn’t account for the time required to gather all the data and make sure it is correct. It is at the very least, an expensive endeavor for a small business to undertake.

Even though small employers will likely have fewer items required for their filings, it is an especially undue hardship on many already struggling small businesses that have been hit with rising health insurance premiums and other increasing costs. For those employers in the 50-99 category, they have likely paid out high fees to complete the ACA required 1094 and 1095 forms and now will be saddled with yet another reporting cost and time intensive gathering of data.

Given the noncompliance of the 1990s in the small group arena, this is just one area that a new administration could very simply and easily remove this unwelcome burden from small employers.

Originally published by www.ubabenefits.com

Recently, the Department of the Treasury, Department of Labor (DOL), and Department of Health and Human Services (HHS) (collectively, the Departments) issued FAQs About Affordable Care Act Implementation Part 34 and Mental Health and Substance Use Disorder Parity Implementation.

The Departments’ FAQs cover two primary topics: tobacco cessation coverage and mental health / substance use disorder parity.

Tobacco Cessation Coverage

The Departments seek public comment by January 3, 2017, on tobacco cessation coverage. The Departments intend to clarify the items and services that must be provided without cost sharing to comply with the United States Preventive Services Task Force’s updated tobacco cessation interventions recommendation applicable to plan years or policy years beginning on or after September 22, 2016.

Mental Health / Substance Use Disorder Parity

Generally, the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) requires that the financial requirements and treatment limitations imposed on mental health and substance use disorder (MH/SUD) benefits cannot be more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical and surgical benefits.

A financial requirement (such as a copayment or coinsurance) or quantitative treatment limitation (such as a day or visit limit) is considered to apply to substantially all medical/surgical benefits in a classification if it applies to at least two-thirds of all medical/surgical benefits in the classification.

If it does not apply to at least two-thirds of medical/surgical benefits, it cannot be applied to MH/SUD benefits in that classification.

If it does apply to at least two-thirds of medical/surgical benefits, the level (such as 80 percent or 70 percent coinsurance) of the quantitative limit that may be applied to MH/SUD benefits in a classification may not be more restrictive than the predominant level that applies to medical/surgical benefits (defined as the level that applies to more than one-half of medical/surgical benefits subject to the limitation in the classification).

In performing these calculations, the determination of the portion of medical/surgical benefits subject to the quantitative limit is based on the dollar amount of all plan payments for medical/surgical benefits in the classification expected to be paid under the plan for the plan year. The MHPAEA regulations provide that “any reasonable method” may be used to determine the dollar amount of all plan payments for the substantially all and predominant analyses.

MHPAEA’s provisions and its regulations expressly provide that a plan or issuer must disclose the criteria for medical necessity determinations with respect to MH/SUD benefits to any current or potential participant, beneficiary, or contracting provider upon request and the reason for any denial of reimbursement or payment for services with respect to MH/SUD benefits to the participant or beneficiary.

However, the Departments recognize that additional information regarding medical/surgical benefits is necessary to perform the required MHPAEA analyses. According to the FAQs, the Department have continued to receive questions regarding disclosures related to the processes, strategies, evidentiary standards, and other factors used to apply a nonquantitative treatment limitation (NQTL) with respect to medical/surgical benefits and MH/SUD benefits under a plan. Also, the Departments have received requests to explore ways to encourage uniformity among state reviews of issuers’ compliance with the NQTL standards, including the use of model forms to report NQTL information.

To address these issues, the Departments seek public comment by January 3, 2017, on potential model forms that could be used by participants and their representatives to request information on various NQTLs. The Departments also seek public comment on the disclosure process for MH/SUD benefits and on steps that could improve state market conduct examinations or federal oversight of compliance by plans and issuers, or both.

 

By Danielle Capilla, Originally published by United Benefit Advisors – Read More

0818On December 1, 2016, the Department of Labor (DOL) will implement changes raising the minimum compensation for exempt employees to $47,476 annually. While salary is just half of a two-part equation that includes a duties test of essential job functions, scrutiny is under way to analyze compensation and find solutions to avoid conflict with the new rule. Many employers are asking: Why not just have all employees work 40 hours and get approval for overtime?

The statutory definition of “employ” is “to suffer or permit to work.” The phrase “suffer or permit” to work does not mean “approve.” Hence, any time a nonexempt employee works, the employee must be compensated. A nonexempt employee cannot volunteer to work off the clock, so activities as innocuous as an employee arriving early and just starting their day become problematic. Common advice is to issue progressive discipline for employees who work unapproved overtime, but writing up a good employee for what they reasonably perceive to be initiative can open a new can of worms.

Employers further bear the burden of capturing and recording all time worked. Documenting compensable time is complicated when reviewing the variations of what constitutes work time. The non-exhaustive list includes:

  • Waiting or on-call time when it is on the employer’s premises (for example, waiting for a shift replacement to arrive)
  • Work-related training activities (including travel time if they are off-site
  • Eating meals while checking emails or answering phones
  • Work travel outside of the employee’s normal commute
  • Answering work emails or completing reports after work hours
  • Attendance at required company functions, including volunteer activities and social events

Even with a sophisticated time-keeping system, capturing all hours is a challenge. So what are some solutions? View the latest UBA Compliance Advisor, “Salary Considerations under the New DOL Standards,” which reviews workable solutions using salary increases, bonuses or incentives—as well as important considerations when paying nonexempt staff on a salary basis.

Originally published by United Benefit Advisors – Read More

0809Your new position just got approved and, finally, that mission-critical headcount addition is green-lighted. Celebration ensues until the actual work of finding the ideal candidate begins. The first step is to get a job description. In some cases, a perfectly vetted position analysis and description may exist, one that captures the particulars and purpose of the job. For those not fortunate enough to have a compensation professional providing such information, the search to find the right words to describe the work begins. So launches the journey of a thousand words cut-and-pasted from Indeed.com.

The recent changes to the Department of Labor (DOL) overtime rules, which will impact an estimated 4.2 million workers, put the spotlight back on job descriptions, or more specifically, the content of those documents as businesses are forced to assess whether their employees meet the duties test for exemption. This was not the first time in recent years that the DOL has focused on essential job functions. The 25th anniversary of the Americans with Disabilities Act (ADA) brought additional entitlements to individuals, including extending accommodation to pregnant workers and tagging onto Family and Medical Leave Act (FMLA) time off with allowances for extended ADA leaves. All of these changes rely on documentation of essential job functions and the conditions under which they are performed.

Since the enactment of the ADA, most employers have been incorporating physical requirements into position descriptions. If, however, the level of detail is lacking, the accommodation process can be derailed. Consider:

  • the frequency of physical requirements, not just the weight lifted, and
  • the percentage of time spent standing, sitting, bending, or moving and the level of repetition in the performance of duties.

Exempt (white collar) jobs require unique differentiators, including stamina requirements such as:

  • Longer hours and extended work weeks
  • Percentage of time spent travelling
  • Specific credentials (i.e. CPAs)

Additionally, if there are environmental or psychological requirements applicants must meet, these should be included in the job description.

The ADA views essential job duties through the lens of the ability to perform with or without accommodation, thus taking a broad view of the scope of work. Hence, it may be incumbent on an employer to reassign duties, restrict tasks or change responsibilities in order to accommodate an individual. This can create difficulties when trying to comply with the Fair Labor Standards Act (FLSA).

For example, to be considered exempt under the executive duties test within the FLSA, the employee must:

  • regularly supervise two or more other employees, and
  • have management as the primary duty of the position, and
  • have some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments).

The regulations call out specific management duties including training, appraising productivity, monitoring work, and, in general, being “in charge.” In the event that such a manager required accommodation under the ADA, it is possible that in order to comply with the letter of the law, the removal of responsibilities might result in a situation where the individual is no longer meeting the duties requirement to be considered exempt. In this scenario, it might be advisable, for example, to include language in the job description that establishes presence at work as an essential function of management.

This is not a call to front load the descriptions with an overflow of detail. It is, however, important to ensure that the job description reflects the actual functions and outcomes needed and the conditions that impact those processes. It requires careful consideration and a comprehensive needs analysis.

Free resources for detailed information about jobs include the Bureau of Labor Statistics Occupational Outlook Handbook (www.bls.gov) and O*Net OnLine (www.onetonline.org). Both sites are maintained by the U.S. Department of Labor and have substantial databases of job information that represents thousands of employers nationally, providing evidentiary support for the inclusion of essential job functions in a position description.

The following is a reference chart illustrating the importance of job descriptions under each employment law.

Employment
Law
Impact of the Job Description
Fair Labor Standards
Act (FLSA)
The FLSA looks to the content of a job to as a source of information to complete a duties test to ascertain the exempt or non-exempt status of positions.

A job description is not a stand-alone validation of status, but an accurate list of essential functions can go a long way in confirming an employee’s exempt status.

Americans with Disabilities
Act and Pregnancy
Discrimination Act
Detailed job descriptions outline the requirements for a candidate to be considered “qualified.” An employer is not obligated to accommodate an applicant who cannot meet the legitimate skills, experience, education, or other requirements of a position. Pregnancy is treated the same as any other disability.

Undertaking an interactive dialog with a qualified individual depends on well-defined documentation that articulates the tasks, outcomes and the conditions under which the work is performed.

Employers may need to offer employees alternative positions as an accommodation. As new or existing jobs open, they should be reviewed to ensure the credentials needed are current and viable.

Family and Medical
Leave Act (FMLA)
In lieu of a job description, medical providers rely on employees’ characterization of their work. This can be misleading and cause the provider to miss critical information.

Employees who request intermittent leave for a serious health condition could potentially be given temporary job modifications if medical restrictions were more clearly aligned with essential job functions.

Return to work clearances may be compromised if medical providers are not given detailed information about job requirements.

Occupational Health Act Employers lower their experience rating when they are able to implement a robust light duty return to work program. This requires explicit environmental, physical and emotional details in job descriptions.

Accurate credentialing and experience requirements outlined in job descriptions can alleviate accidents and injuries from unqualified workers.

Title VII, including Age
Discrimination in
Employment
Title VII requires that consideration for hiring and compensation, be based on bona fide job requirements. Accurate, impartial recaps of work requirements can serve as a defense against allegations of bias.

Employee performance, which impacts discipline, promotion and opportunities for advancement should be measured against the road map of a comprehensive job description that is measurable and defendable.

Originally published by United Benefit Advisors – Read More

Avoid Increased Penalties by Filing Annual Benefit Plan Reports on Time | Ohio Employee Benefits

Categories: Compliance News, DOL, Industry News, Team K Blog
Comments Off on Avoid Increased Penalties by Filing Annual Benefit Plan Reports on Time | Ohio Employee Benefits

0720Form 5500 is the annual report that group benefit plans use to report required information about the plan’s financial condition and operations. Most group and pension plans that are subject to ERISA are required to file a Form 5500. With the July 31 deadline for calendar year plans fast approaching, and higher penalties for not filing taking effect in August, this is a good time to review this important plan filing.

What is a Form 5500?

Generally, the Department of Labor (DOL), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) all require an annual benefit plan report filing, although there are many exemptions. A single annual report, known as a Form 5500 or Form 5500-SF, satisfies all three. It includes basic plan, sponsor, and administrator identifying information, the type of annual report being filed, and any related Schedules as attachments to the Form 5500.

Who must file the Form 5500?

Form 5500 is needed for both qualified retirement plans and group welfare plans. For this article, we’ll focus on group welfare plans, which include plans that provide medical, prescription drug, dental, vision, long term and short term disability, group term life insurance, health flexible spending accounts, accidental death and dismemberment benefits, long term care, formal severance policies, and telehealth. While other plans may also be considered welfare plans, these are the most common.

Group welfare plans generally must file Form 5500 if:

  • The plan is fully insured and had 100 or more participants on the first day of the plan year (dependents are not considered “participants” unless they are covered because of a Qualified Medical Child Support Order).
  • The plan is self-funded and it uses a trust, no matter how many participants it has.
  • The plan is self-funded and it relies on the Section 125 plan exemption, if it had 100 or more participants on the first day of the plan year.

Are there exemptions?

Yes, there are several exemptions to Form 5500 filing. The most notable are:

  • Church plans defined under ERISA section 3(33)
  • Government plans, including tribal government plans
  • “Top hat” plans that are unfunded or insured and benefit only a select group of management or highly compensated employees.
  • Small insured or unfunded welfare plans. This includes plans with fewer than 100 participants (including qualified former employees and COBRA beneficiaries) at the beginning of the plan year that are fully insured, entirely unfunded, or a combination of both. An unfunded plan has its benefits paid as needed directly from the general assets of the sponsoring organization.

How many Forms 5500 must be filed?

Generally, the number of Forms 5500 depends on the number of ERISA benefits the sponsor maintains, whether those ERISA benefits are combined into one plan, and whether the sponsor is part of a controlled group or is part of a multiemployer welfare arrangement (MEWA).

The plan’s governing documents and operations determine whether benefits are being provided under a single plan and can be reported on one Form 5500. The Summary Plan Description (SPD), required by ERISA, is a document which designates the ERISA plan number and can be used to bundle multiple benefit lines into a single plan for Form 5500 filing purposes.

When must Form 5500 be filed?

A plan’s Form 5500 must be filed by the last day of the seventh month after the close of the plan year. The filing date is based on the “plan year,” which is designated in the SPD or other governing document. If a plan does not have a SPD, the plan year defaults to the policy year.

For calendar year plans, the due date for the Form 5500 is July 31. Employers may obtain an automatic 2-1/2 month extension by filing Form 5558 by the due date of the Form 5500.

Can the Form 5500 be amended?

Yes, it is recommended that the plan sponsor file an amendment for any of the following situations:

  • The original filing omitted a benefit
  • The original filing created a gap in benefit reporting
  • The Schedule A forms were updated with a 10 percent or more increase in commissions or premiums than originally reported by the carrier
  • Mandatory information critical to the report was incorrect or omitted

What happens if the plan has failed to file a Form 5500?

Penalties!! Under ERISA Section 502, the Secretary of Labor may assess civil penalties of up to $1,100 per day against a plan administrator who fails or refuses to file Form 5500. The DOL is able to assess penalties in connection with Form 5500 failures reaching as far back as the 1988 plan year. Penalties are based on whether the Form 5500 was incomplete, deficient, filed untimely or never filed, and if there was willful disregard for refusing to file.

The current penalty for failure or refusal of a plan administrator to file a Form 5500 is up to $1,100 per day. In August 2016, those penalties will increase from $1,100 per day to $2,063 per day, regardless of whether the violation occurred before or after August 2016. If an annual report is rejected for failure to provide material information, it is treated as not having been filed.

In order to encourage sponsors to file, the DOL created the Delinquent Filer Voluntary Compliance Program (DFVCP). It was created as a means for sponsors to “self-report” their non-compliance, and includes a monetary incentive. If a plan sponsor qualifies for the DFVC Program, the penalties are reduced significantly to $10 per day for the first 199 days. If the plan is within a year of being late, the penalty it is capped at $2,000 per plan. If the plan is more than a year late in filing, there is a $4,000 per plan cap.

If the DOL notifies a plan sponsor of its failure to file a Form 5500 or of the assessment of penalties for failure to file, the plan sponsor is no longer eligible to participate in the DFVCP. Penalties may be assessed for the date the reports were initial due, not the date the sponsor was notified of its delinquency.

It is important to note that criminal sanctions and imprisonment are also possible for willful violations of the reporting and disclosure requirements.

As an example, Employer A and Employer B both sponsor a fully insured medical plan and group term life (GTL) plan for their employees. Each employer has the same number of participants in their medical and GTL plans: 75 participants in the medical plan, and 150 participants in the GTL plan.

The plan year for Employer A’s medical plan is December 1 through November 30. The GTL plan is on a calendar year contract. Employer A does not have an SPD wrap document combining these two plans. Employer A does not have to file a Form 5500 for the medical plan because it is fully insured and has fewer than 100 participants. However, it must file Form 5500 for the GTL plan because it has more than 100 participants. Since the GTL plan is on a calendar year (January 1 to December 31) contract, its Form 5500 is due by July 31, the end of the seventh month following the last day of the plan year.

Employer B, on the other hand, has an SPD wrap document which combines the medical and GTL plans into the same ERISA plan year and plan number. The employer chose that plan year to align with the medical plan’s December 1 – November 30 contract year. In this case, Employer B must file a single Form 5500 for both the medical and GTL benefits information because at least one of the plans has more than 100 participants. Its Form 5500 is due by June 30.

Employers should note that government agencies recently proposed significant changes to Form 5500 reporting, and should ensure they stay up to date on requirements as they change.

Originally published by United Benefit Advisors – Read More

0527From 2013 to 2015, a series of Supreme Court cases and government updates have changed the landscape of the way employers must consider same-sex spouses in relation to employee benefits.

Most recently, in June 2015, the Supreme Court ruled in Obergefell v. Hodges, that the 14th Amendment requires a state to license a marriage between two people of the same sex, and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out of state. Prior to the Supreme Court’s decision in Obergefell v. Hodges, approximately two-thirds of states recognized same-sex marriage (whether performed within the state or another state or country that recognizes same-sex marriage).

In February 2015, the Department of Labor (DOL) issued an updated definition of “spouse” under the Family and Medical Leave Act (FMLA) to make compliance easier, and defined “spouse” as a husband or wife, which refers to a person “with whom an individual entered into marriage as defined or recognized by state law.” The governing state law is that of the celebration state, or where the marriage took place. This definition was set to go into effect across the United States on March 27, 2015, but litigation in Texas, Arkansas, Louisiana, and Nebraska prevented the new rule from going into effect in those states immediately. After the ruling in Obergefell, which severely undermined the arguments of the objecting states, the injunction was dissolved.

In June 2013, the Supreme Court ruled that the Defense of Marriage Act (DOMA), which provided that, for federal law purposes, marriage could only be between a man and a woman, was unconstitutional.

Implication for Employers

For individuals with a same-sex spouse (validly married in a state allowing same-sex marriage) who reside in a state that did not previously recognize same-sex-marriage, the ruling in Obergefell likely triggered a change in status event for Section 125 plans. That is because, as of June 26, 2015, the individual was considered married under state law, whereas they were not the day before.

As a result of these changes, employers need to review the eligibility requirements in their group life and health plans, Section 125 plans, and health reimbursement arrangements. The Employee Retirement Income and Security Act (ERISA) requires employers to administer their plans according to the terms of the plan, which means that the plan’s definition of a covered spouse is key. A plan that covers “spouses” or “lawful spouses” must offer coverage to same-sex spouses.

While most practitioners agree that fully insured plans are required to cover same-sex spouses, employers should contact their carrier to verify this approach.

Download UBA’s Compliance Advisor, “Same-Sex Marriages and Group Health Benefits” for comprehensive information on tax treatment of same-sex spouses, FMLA administration, and whether self-funded plans may exclude same-sex spouses.

The IRS has issued Frequently Asked Questions that employers and employees may also find helpful. The questions and answers that relate to benefits begin with Question 10.

Originally published by United Benefit Advisors – Read More