Benefits FAQ for Employers
Tuesday March 3rd, 2015
Every workday finds us with questions, many of which can be answered automatically, without wondering if we are correct. There are others, however, that do require more research to uncover that answer. Whatever our question, we can rest assured someone else needs to know the same thing. We’re sharing a few commonly asked benefits questions and answers.
Q. Does Section 6055 apply to Health Reimbursement Arrangements (HRAs)?
A. Minimum essential coverage includes COBRA coverage, major medical coverage provided through a retiree-only plan and also retiree-only HRAs. The regulations do not require reporting for coverage that provides benefits as an addition or supplement to a health plan or arrangement that constitutes minimum essential coverage. This exclusion means that reporting is not required for HRAs that are integrated with the employer’s medical plan or for Medicare supplemental coverage offered to retirees. Note: Whether reporting is required for stand-alone retiree HRAs is not clear.
Q. Can an employer terminate an existing Section 125 plan and start a new plan for the sole purpose of allowing a change of elections?
A. Terminating a plan for a valid business reason is permitted (yellow flag); however, not if a new plan is started right away and the sole purpose was to allow election changes. Amending the plan is allowed but only to allow new deductions or reimbursement for new options, not to revoke any elections. The permitted election change of allowing an individual to revoke their election on non-health plans to elect health plans is not consistent with the change.
Q. If an employer changes a plan year that is part of a Section 125, what document changes are required?
A. For open enrollment date changes, they can make the restatement. For a plan year change, they need to make an amendment.
Q. If a company contributes towards the employees’ Health Savings Account (HSA), are they also required to contribute towards the HSA accounts for COBRA participants?
Q. As of December 31, 2014, Certificates of Creditable Coverage and the General/Individual Notice of Pre-Existing were eliminated which simplified HIPAA Portability. Are Special Enrollment Rights Notices still required?
Summary of Benefits and Coverage
Q. Many church plans are exempt from ERISA. Do they need to provide the Summary of Benefits and Coverage (SBC)?
A. Even though church plans are not subject to ERISA, they are still governed by the Internal Revenue Code (IRC) of which the ACA amended and requires the SBC.
Q. We have 400 employees and can’t use the hourly rate of pay method to determine affordability due to it being based on only 30 hours. Since most employees work 45 or more hours per week, the W-2 method seems the obvious choice. By using this option we will not know until the end of the year if coverage is affordable, or is this a monthly calculation? What do we tell new employees about affordability when we don’t know if coverage is affordable and could change if the employee decides to max out the 401(k)? Can we give different marketplace notices to employees telling them coverage is affordable, is not affordable, or it’s unknown at date of hire? Can we set the employee cost for coverage at an amount that will make coverage affordable for the majority of employees and at 9.5% of compensation if that is less for some of the lower paid employees?
A. The rate of pay safe harbor is based upon 130 hours/month and not 30 per week. This method has more positive results for employers who experienced high numbers of more than 9.5% using W-2 Box 1 wages. You are correct that using 9.5% of W-2 could be different by year-end if comp changes, but you would look at wages on a monthly basis. Using the rate of pay safe harbor, you’re allowed to make a determination at the beginning of the plan year, even if the rate of pay might change, to determine affordability. Employers should also try the FPL safe harbor method to see if that produces different results. The employer would be able to provide a Marketplace Notice with accurate data based upon the FPL or rate of pay safe harbor method. In using the W-2 method, don’t use a 9.5% contribution especially if there might be any adjustment that would put them over during a few months
Q. Due to carrier issues, we are changing policies and will have a 60-day gap in coverage. We have two COBRA continuants enrolled on the old plan that would like to continue on the new coverage. The new carrier is okay with enrolling them as long as they calculate the 18 months of continuation from the initial qualifying event to avoid them receiving more than 18 months in total of continuation. Is this allowed from the perspective of the COBRA legislation? If we have a gap in coverage and then resume a group policy, can the continuants be put on the new plan? There was no change in ownership or name change on the policy.
A. One of the COBRA termination events is termination of the group health plan. If you can prove the plan was not terminated to eliminate COBRA individuals, it would not appear discriminatory. Offering the individuals the opportunity to enroll in the new plan, would be viewed as favorable. Their COBRA maximum time frame would still be measured from the day of their original qualifying event.
There are three other issues to consider in this situation:
- Did the COBRA individuals have any claims that were not paid during this time?
- What happened to COBRA and active employee’s premiums from the no coverage period of time?
- ACA’s prohibition of rescission of coverage.
Q. A terminated employee was told she can have COBRA, but only for three months, saying there is some new rule that allows the employer to choose either 18 months or three months and they are doing three months. Is this true?
A. The qualifying event of a termination of employment allows for 18 months of COBRA coverage. The employer could offer to pay for three months of COBRA, but cannot limit COBRA coverage to three months.
Managing workforce benefits is a demanding job. Having answers makes it just a little easier.