Compliance Deadlines

As enacted, this SBC requirement was to apply as of March 23, 2012.  This recent guidance allows compliance to be deferred until the first open enrollment period beginning on or after September 23, 2012.  For participants who are not a part of the open enrollment process (such as new hires or special enrollees), the compliance deadline is the first day of the first plan year beginning on or after September 23, 2012.

To comply with this requirement, an SBC must be included in any application materials provided as a part of the open enrollment process.  If there are no such materials, the deadline for providing an SBC is the first day on which a participant is eligible to enroll.  Plans have additional time to provide an SBC to any special enrollee.  The deadline in that case is 90 days after the participant’s enrollment date (i.e., the same as the deadline for providing a summary plan description).

Covered Plans

These SBC rules apply to both insured and self-funded plans.  The plan administrator (typically, the sponsoring employer) is responsible for providing the SBC.  In the case of an insured plan, however, the insurer is equally responsible.  Moreover, if an insurer provides a timely and accurate SBC, the plan administrator is not required to do so.

This is another health care reform requirement to which even “grandfathered” plans are subject.  The same is true for even stand-alone health reimbursement arrangements, as well as “mini-med” plans that have received a waiver from the prohibition on annual benefit limitations.

Certain employer plans are exempt from this SBC requirement, however.  These include HIPAA “excepted benefits,” such as stand-alone dental and vision plans and most flexible spending arrangements.  Health savings accounts are also exempt.  The agencies note, however, that even exempt FSAs or HSAs may need to be referenced in an SBC for a comprehensive medical plan, as a way of explaining that plan’s deductibles and other co-payment features.

Recent Changes

Although the final regulations track most of the August 2011 proposals, certain changes should make it somewhat easier to comply with this SBC requirement.  These include the following:

• An SBC need not disclose information concerning premiums.
• An SBC may be combined with other plan materials, such as a summary plan description, so long as the SBC is prominently displayed.  In the case of an SPD, the agencies suggest that the SBC immediately follow the SPD’s table of contents.
• Although the agencies continue to emphasize the importance of using the published template when preparing an SBC, they now acknowledge that certain modifications are permissible.  These might be needed to describe discounts available through provider networks, benefits that vary with the type of facility, multi-tier drug formularies, or incentives for participation in wellness programs.
• The proposed regulations described three examples to be included in the “Coverage Facts” portion of each SBC:  maternity care, management of type 2 diabetes, and treatment of breast cancer.  Responding to concerns raised by various commenters, the breast cancer example has now been removed.  However, the agencies have specifically reserved the right to require up to six different examples, so future guidance may require examples of more acute medical conditions.
• The version of the SBC template issued in August of 2011 was drafted by a task force organized by the National Association of Insurance Commissioners.  Perhaps for that reason, it spoke in terms of a “policy” or “insurer.”  Recognizing that these terms are not appropriate for self-funded plans, the revised template substitutes “coverage” and “plan” for these two terms.
• The final regulations make it somewhat easier to distribute an SBC via electronic means, rather than on paper.  The rules have not changed for participants and beneficiaries who are currently enrolled in the plan (for whom electronic delivery is permissible only in accordance with the DOL’s stringent requirements), but somewhat more liberal rules now apply to individuals who are merely eligible to enroll.  Assuming an SBC is in a “readily accessible format,” it may be posted on the Internet.  The plan or its insurer would then notify the eligible individual (either on paper or via e-mail) that the document is available online, providing both the Internet address and a statement that the SBC will be provided in paper form upon request.

The penalty for failing to comply with this SBC requirement is $1,000 for each participant and beneficiary who fails to receive a timely and accurate SBC.  Plan administrators should therefore take immediate steps to prepare appropriate SBCs (one for each benefit option), well in advance of the upcoming open enrollment season.  Administrators of insured plans will want to coordinate with their insurers, but self-funded plans should familiarize themselves with both the final regulations and numerous pieces of related guidance. 

Kenneth A. Mason, Partner
Spencer Fane Britt & Browne LLP

In an attempt to arm plan fiduciaries with additional information about the increasingly complex services provided by retirement plan vendors (such as record keepers, third-party administrators, and brokers) and the fees charged for those services, the Section 408(b)(2) regulations impose specific disclosure requirements on those providers.  Under ERISA, fiduciaries must ensure that these arrangements are reasonable, and that only reasonable compensation is paid for them.  As we reported in our May 2011 article, the information that will be provided under these rules is intended to help fiduciaries fulfill that responsibility.

The final regulations published on February 2 replace an interim final rule that was released on July 16, 2010.  In addition to delaying the effective date of the disclosure requirements, the final rule makes a number of minor changes in response to comments received on the interim final rule.  These include:

• An exclusion for certain Code § 403(b) annuity contracts and custodial accounts;
• Expansion of the information that service providers must disclose about “indirect” compensation they receive;
• Changes to the investment-related disclosures to conform to the requirements of the DOL’s participant-level disclosure rules; and
• A separate provision for disclosing changes to investment-related information, which must be updated at least annually.

The final regulations “strongly encourage” service providers to offer plan fiduciaries a “guide” or summary of their disclosures. The DOL included a sample guide as an appendix to the final rule. Debate about whether to require such a summary disclosure is rumored to have delayed the release of the final rules. For now, the summary is voluntary, but the DOL strongly hinted that it may make the summary mandatory in future regulations.

These regulations will be effective for contracts or arrangements (whether existing or new) between covered plans and covered service providers as of July 1, 2012. This delayed effective date (from April 1) also will push back the effective date for disclosures that plan administrators must send to participants. Initial annual participant-level disclosures must be furnished within 60 days after the effective date of the  service provider disclosures. For calendar year plans, this means that the initial disclosure of plan- and investment-related information must be furnished to participants no later than August 30, 2012 (rather than May 31), and the first quarterly statement must be furnished to participants no later than November 14, 2012 (rather than August 14).

Gregory L. Ash, Partner

Spencer Fane Britt & Browne LLP

This notification is brought to you by our Member Firm of United Benefit Advisors – a member-owned alliance of more than 140 premier independent benefit advisory firms and one of the nation’s five largest employee benefits advisory organizations – and Spencer Fane Britt & Browne LLP, with offices throughout the Midwest and more than a century of experience providing legal counsel. This publication is designed to provide accurate and authoritative information.  It is distributed with the understanding that the author, publisher and editors are not rendering legal or other professional advice or opinions on specific matters, and accordingly, assume no liability in connection with its use. The choice of a lawyer is an important decision and should not be made solely upon advertisement. Past results afford no guarantee of future results. Every case is different and must be judged on its own merits.

UBA also co-sponsors an informative webinar series designed to help employers anticipate emerging regulatory issues and stay abreast of the latest human resource trends and best practices. For more information, contact The LBL Group today.

Although 2012 is just getting started, many employers are already looking ahead to next year for a change in Form W-2 reporting.

Under the Patient Protection and Affordable Care Act (PPACA), companies are required to report the value of their employer-sponsored health care coverage on employees’ W-2s. This takes effect for most employers this year, meaning the values must be represented on the forms issued in 2013. Smaller employers — those with fewer than 250 W-2s to distribute, are exempt until at least 2014.

The IRS has issued a series of notices to help employers handle this new task. The guidance, according to Michael R. Durnwald of the law firm Katten Muchin Rosenman LLP, clarifies that:

• While the value of the plans must be reported, it does not affect the tax treatment of the health care coverage.
• Employers do not have to create a W-2 to satisfy this requirement for someone who normally would not receive a form (a retiree with health benefits, for instance).
• Employers can calculate the value in a number of ways, including using the COBRA premium.
• Flexible spending accounts, dental and vision plans should not be included in the value calculation.

The IRS added to that guidance shortly after the New Year’s holiday, according to a report by Business Insurance. The IRS further clarified that employers can include contributions to health reimbursement arrangements in the calculation, but are not required to do so.

Also, costs related to wellness initiatives, employee assistance programs and on-site clinics do not need to be included as long as the employer doesn’t charge premiums for them under COBRA.

Ultimately, however, the fate of this and other provisions of PPACA rests in the hands of the Supreme Court, which announced in December that it would start hearing oral arguments regarding the health care reform law in late March. A final ruling is expected in June, according to a Reuters report.

• There is no need to report any employeecontributions to a flexible spending account (“FSA”).  However, if an employee allocates any employer “flex credits” to a health FSA, thoseemployer amounts must be reported.
• Whether the value of dental or vision coverage must be reported on a W-2 depends on whether that coverage constitutes an “excepted benefit” under the HIPAA portability and nondiscrimination rules.  In general, this would be the case if either (1) the coverage is offered under a separate policy, certificate, or contract of insurance, or (2) participants have the right to elect the dental or vision coverage and must pay an additional premium if they do so.  The value of such excepted benefits need not be reported.
• An employee assistance program (“EAP”), wellness program, or on-site medical clinic may be subject to this reporting requirement if it constitutes a “group health plan.”  However, the reporting of these benefits will be required only if the employer charges a separate premium for someone to receive COBRA coverage under these benefits.
• Even if an employer is not required to report the value of certain types of health coverage – either the types listed immediately above, or coverage received under a health reimbursement arrangement (“HRA”), as noted in the prior guidance – the employer maychoose to report these amounts.  For some employers, this approach may be more consistent with the systems in place to track the value of the various types of coverage provided to each employee.
• Pre-existing rules require an employer to provide a W-2 within 30 days of a request received from an employee who terminates during the calendar year.  Under this recent Notice, however, such a W-2 need not report the cost of any health coverage received by that employee.
• Moreover, if an employer waits until year-end to supply W-2s to terminated employees (the more usual case), those W-2s may report either the value of the coverage received only while an active employee or the value of the coverage received through the end of the year (thereby including the value of any COBRA coverage).  The employer must be consistent, however, in selecting one of these two approaches.
• In a bit of welcome news, the Notice provides that an employer need not report the value of health coverage received by any individuals who are not otherwise entitled to receive a W-2.  These might include COBRA beneficiaries, retirees, non-employee directors, or independent contractors.
• The IRS Form W-3 (which is used to transmit employee W-2 data to the IRS) need not report the cost of any health coverage.
• In general, this W-2 reporting requirement applies even to the value of any health coverage that must be included in an employee’s taxable income.  This might include the value of coverage provided to an employee’s domestic partner, or to a non-dependent child over age 27.  Contrary to the earlier guidance, however, it is not necessary to report the value of coverage that is taxable only because (1) a self-funded plan discriminates in favor of highly compensated individuals (in violation of Section 105(h) of the Tax Code), or (2) an employee is a 2% or more shareholder in a Subchapter S corporation.
• If a single plan provides both health coverage andnon-health coverage (such as disability or life insurance), an employer may use any reasonable method to allocate the total cost of coverage between the two categories – and then report only the cost of the health coverage.  Alternatively, if either the health coverage or the non-health coverage is merely “incidental” to the other type of coverage, the employer may treat the plan as though it provided only the primary type of coverage.
• The value of the coverage provided to an employee may be determined on the basis of the facts known to the employer on December 31 of the reporting year.  Accordingly, any information learned after that date may be disregarded, even if that information results in the employee’s coverage during the reporting year either increasing or decreasing in value.  The value might increase, for example, if an employee was allowed to retroactively add coverage for a newborn child who was born during the reporting year.  It could decrease if an employee retroactively dropped coverage for a former spouse in connection with a divorce.
• If the final pay period in a calendar year laps over into the following year, an employer may allocate the value of any health coverage received during that pay period between the two calendar years, based on a reasonable allocation of the days falling within each year.  Alternatively, so long as it is done consistently, the employer may allocate that entire pay period toeither of the two calendar years.
• Although prior guidance suggested that both hospital indemnity insurance and coverage for a specific disease or illness were entirely exempt from this W-2 reporting requirement, the most recent Notice limits this exemption to plans under which an employee pays the full premium for that coverage on an after-tax basis.  If an employer pays any portion of the premium – or if an employee pays any portion of the premium on a pre-tax basis – the entire value of the coverage must be reported.  As a result, even some “voluntary insurance arrangements” (which are exempt from most requirements of ERISA) must be reported on a W-2 – that is, if employees pay their premiums on a pre-tax basis.

More employers are betting that health plans with higher deductibles will take some of the sting out of soaring health care costs.

New research by the Employee Benefit Research Institute (EBRI) found that 8.4 million American adults, or 7 percent, now are covered by private consumer-driven health plans (CDHPs) with health savings accounts (HSAs) or health reimbursement arrangement (HRA), according to a report by CCH. Another 7.4 million are covered by high-deductible health plans without HSAs or HRAs, the report said.

Still, traditional plans continue to dominate the employee benefits scene. EBRI noted that 78 percent of Americans with private insurance in 2011 were covered by so-called “traditional” plans that had deductibles of less than $1,000 for an individual and $2,000 for a family, according to a report by the Kansas City Star.

The EBRI study noted a number of positive behaviors exhibited by people covered by CDHPs, including being more cost-conscious and more likely to check whether their plan covered specific medical expenses.

Wellness programs, however, were no more attractive to those under CDHPs than those in traditional plans. CDHP-covered respondents who had access to wellness plans said they did not participate because they could handle lifestyle changes on their own (60 percent), didn’t have time (52 percent) or were already healthy (45 percent), according to the CCH report. However, 66 percent said they’d join up if the company sweetened the employer HSA contribution.

The apparent lack of enthusiasm for wellness can present a big challenge for employers with high-deductible options. While a beefier HSA would help workers pay for health care expenses that are already incurred, a CDHP expert notes that companies with high-deductible coverage must be proactive in helping employees improve their lifestyles to avoid future health-related costs.

Dr. Michael Parkinson, the senior medical director of health and productivity for UPMC Health Plan, said CDHPs work best when supported by a “health incentive account.” Parkinson noted in an interview with SmartBusiness in Pittsburgh that companies would contribute money to this incentive account when employees displayed good behaviors, such as getting a flu shot or for preventive doctor visits. Workers could use this account to further cut their out-of-pocket medical expenses.

“The high-deductible component encourages employees to be active consumers of health care, while the healthy lifestyles reward component gives the opportunity to earn financial rewards for activities that have been designed to improve their health,” Parkinson said.

Most employers say they understand the importance of benefit communications. Unfortunately, many struggle to translate that knowledge into actions.

Now more than ever, employers are turning to technology to make those communications easier and more effective.

A recent study by ADP found that 80 percent of polled employers said it is vital for employees to fully understand their benefit options, but only 60 percent of respondents said they were confident that their employees really get it, according to a PLANSPONSOR report.

Web portals have become a key tool in battling this gap, with 71 percent of midsize employers saying they have a devoted website for employee benefit communications, according to the ADP poll.

Emerging technologies, especially mobile devices, appear to be spurring interest in the use of technology-based benefit communications. The ADP survey found that participants estimated that about two in five employees use mobile devices in their work, and 39 percent of polled midsize companies said they provide mobile access to benefit information, according to the study.

Like mobile devices, social media tools and websites have seen an explosion of use over the past few years. As the social media phenomenon continues to blossom, so does its use as an internal communications tool by companies.

More than 60 percent of companies report that they make at least one social media tool available to some or all of their employees, according to new research by International Association of Business Communicators and Prescient Digital Media. The survey, published in Employee Benefit News, noted that among companies’ corporate intranets, the most popular social media features were blogs (75 percent), discussion forums (65 percent) and instant messaging (63 percent).

Toby Ward, president of Prescient Digital Media, told EBN that companies need to make a real commitment to planning and technology if they want these kinds of communications to stick.

“While the popularity of social media tools . . . is rising, only about one-quarter of frontline employees and executives alike rate their intranet social media as good or very good,” Ward said. “Without a proper plan, adequate investment and the requisite change management and communications, most intranet social media initiatives will fail.”

Mr. Peter Freska, LBL Insurance Services \ The LBL Group, Los Alamitos, CA, has been designated a Certified Employee Benefit Specialist (CEBS) by the International Foundation of Employee Benefit Plans and the Wharton School of the University of Pennsylvania.

Mr. Freska qualified for the designation by passing a series of college level national examinations on employee benefit subjects, and by meeting and attesting to high standards of business and professional conduct.  Mr. Freska is one of more than 12,000 graduates.

Mr. Freska is also a member of the National Association of Insurance and Financial Advisors.

The 2012 National CEBS Conferment Ceremony will take place at the 31^st Anniversary Employee Benefits Symposium of the International Society of Certified Employee Benefit Specialists (ISCEBS) in San Francisco, California on August 5-8. ISCEBS, the Graduate society of CEBS designees, is headquartered at the International Foundation of Employee Benefit Plans in Brookfield, Wisconsin.

CA INS LIC: #0E46056

LBL INSURANCE SERVICES, INC. \ THE LBL GROUP

LBL Insurance Services, Inc. \ The LBL Group specializes in designing strategies around Employee Benefits, helping employers design Strategic Plans focused on Health Insurance, Employee Communications, Wellness & Lifestyle Management Programs, Voluntary Benefits, Executive Compensation, and Retirement Services.

The LBL Group created The Essential C.A.R.E. Process to help companies engage, attract and retain key employees.  By representing all of the major insurance carriers and vendors, clients have access to the latest technology, products and services when designing cost effective employee benefits strategies.

“The Essential C.A.R.E. Process™ helps take advantage of the most essential opportunities for creating a company that C.A.R.E.s (Collaboration, Accountability, Relevance, Engagement).  Created by The LBL Group, The Essential C.A.R.E. Process will help you attract and retain quality employees, enhance your organization, and achieve your goals,” says Larry Lambert, CEO.

COMPANY HISTORY:

LBL Insurance Services, Inc. \ The LBL Group has been providing insurance and financial services to our clients and the community for over 38 years.  Originally established in the City of Long Beach, California, The LBL Group relocated in March 2001 to the City of Los Alamitos in Orange County California.  Our Mission is to Enhance the “Quality of Life” for those we serve through insurance and financial services.

The LBL Group is comprised of following strategic departments designed to provide our clients an array of specialized services.  We offer a full service approach to employee benefit consulting and brokerage services to employer groups and individuals.  Our expertise includes Employee Benefits, Wellness & Lifestyle Management, Voluntary Benefits, Retirement Services, Life Insurance, Medicare and Long Term Care Planning, and Wealth Management.  The LBL Group has been a proud member of the Long Beach, Cypress and Los Alamitos Area Chambers of Commerce since 1972.

If you would like to learn more about LBL Insurance Services, Inc. \ The LBL Group and the products and services provided, please call (800) 451-8037 or visit www.lblgroup.com. (CA. Insurance License 0561829)

FOR ADDITIONAL INFORMATION, CONTACT:

Contact Person: Stuart Lambert, CA LIC. #0D20267

Company Name: LBL Insurance Services, Inc. \ The LBL Group

Company Address: 4281 Katella Ave., Suite 221, Los Alamitos, CA 90720

Telephone Number: (714) 236-8270 Fax Number: (714) 236-4150

Email Address: stuart@lblgroup.com

Web site address: www.lblgroup.com

For many employers, this scenario is all too familiar: A company starts a wellness program or purchases a stellar benefit in the hopes that they will boost morale, retain top talent and even shrink health insurance costs. Yet the company still ends up with an unhappy and unhealthy workforce that is unproductive and difficult to motivate.

A common reason: Regardless of what rich perk or plan an employer offers, it likely will fizzle if employees either don’t know about it or don’t care. That’s why employee engagement and communication is just as vital as the benefit itself.

DISCOVER WHAT EMPLOYERS AND BENEFITS EXPERTS NEED TO KNOW:

• Increasing productivity and employee retention
• Building employee appreciation of benefits offerings
• Improving employee engagement with consistent communication
• Boosting profits through more engaged workers

This white paper explores the importance and advantages of implementing an employee engagement program, with a variety of experts sharing insights about communications strategies, motivational activities and financial benefits.

Click “here” to download your copy of this free premium white paper.

For many, the first ingredient involves restoring the matching contribution — a benefit that many employers dumped when the downturn hit. Most employers have already taken this step, according to a new industry survey reported in Business Insurance. Three-quarters of employers that suspended a 401(k) match have restored it, according to a poll by Towers Watson. Seventy-four percent of those employers bumped the match back to its original total. Nearly a quarter of companies (23 percent) restored the match but at a lower rate this time around.

In addition to bringing back the match, employers can mix up plan types and help provide information and support to get employees’ retirement savings back on track.

For example, Roth 401(k)s, which allow employees to contribute after-tax funds, are getting serious looks from employers these days. A poll by The Profit Sharing/401(k) Council of America notes that 46 percent of employers offered this choice in 2010, compared with 18.4 percent in 2006, according to Workforce Management.

The Roth option may be attractive to many workers because those employees’ current tax bracket likely will rise as they get older and make more money, the report said. Under that scenario, Roth participants would see savings through a lower tax bill in retirement.

Companies also can encourage their employees to fatten their retirement prospects by encouraging smart investing and finding resources to help them make the right decisions, experts said. A number of industry surveys have shown that advice from investment professionals leads participants to save more and diversify their portfolios.

Luckily for employers, many plans and benefit advisors now offer personalized, full-service advising in addition to educational materials about general investing, according to a report in The Wall Street Journal.

A recent survey by the Plan Sponsor Council of America noted that 58 percent of profit-sharing and 401(k) plans offered investment advice in 2010. Also, the Department of Labor recently relaxed a rule allowing providers to offer advising services directly to employees rather than having to go through a third party.

Unfortunately, employees have been slow to take advantage of either the Roth option or investment advice. For instance, only 16 percent of employees select the Roth plan when it is offered, the Profit Sharing/401(k) Council of America reports. As for investment advice, only a quarter of employees take advantage of that feature when it is available, according to the WSJ report.

Despite these challenges, most companies — including small businesses — are renewing their commitment to their retirement benefits and are working to keep the benefit attractive.

“A few years ago we’d have small-business owners who wouldn’t put [retirement] high on the list of things that attract and retain employees,” Rich Linton of Bank of America Merrill Lynch told Employee Benefit News. Now, however, companies of all sizes are crafting their benefits package to help their employees secure their financial future, Linton said.

Beginning on January 1, 2013, the maximum contribution allowed to a FSA will be $2,500 per year (note that this limitation only applies to MEDICAL FSAs; dependent care and other limited-purpose FSAs are NOT subject to this limitation). This cap is per individual; a husband and wife each working at two different companies may both take part in their company’s FSA Plan at the $2,500 cap, potentially providing them with a total of $5,000 in medical FSA contributions.

However, we wanted to draw your attention to the fact that this cap will affect ANY FSA that has a plan year ending after 1/1/2013. In other words, if your FSA plan year does not run on a true calendar-year (for example, February 1 through January 31), you will likely need to amend your plan on the first day of the pre-1/1/2013 plan year in order to avoid contributing more than $2,500 over the course of that plan year.

Should your FSA be subject to the above (or, you have general questions regarding this matter), please feel free to contact our Compliance Consultant, Michael Cramer, at (714) 236-8270.