02/01/2014

Another year has come and gone. With annual enrollment safely out of the way for most plans, now may be an excellent time to schedule a comprehensive review of your benefits administration policies and procedures.

The regulatory environment is changing fast – particularly in the area of health care plan administration. Indeed, the closing weeks of 2013 included a near dizzying array of changes, as the federal government struggled to implement the Affordable Care Act. Meanwhile, the Labor Department is constantly updating its regulations covering ERISA plans, etc. Here are some of the costly mistakes plan sponsors too often make – and how you may be able to avoid them.

Update Plan Documents. ERISA mandates that employers maintain written plan documents. Management should review these documents regularly. They must be updated to comply with new laws and regulations, including the Affordable Care Act. Disclaimer materials included in smaller or less detailed materials distributed to your rank and file workers should reference your plan documents.  In case of any discrepancies, it will be your written plan documents that control how to resolve them – not the material you distribute to employees.

Update Summary Plan Descriptions. ERISA rules mandate that all workers receive an SPD each year, covering each benefit plan. You can comply by producing booklets, pamphlets, email or intranet access, or any number of other media, but unless you make a concerted compliance effort, these will likely not meet the requirements.

Ensure Eligibility. You should ensure that all workers covered by your plans are actually eligible for coverage. It doesn’t make much sense to pay twice for benefits for leased employees, for example, because you were careless about segregating enrollment materials for leased and organic employees.

Check for Age. You should look for any employees who may have ‘aged out’ of plans, by qualifying for Medicare.

Ensure Distributions are Calculated Correctly. You must account for the definition of compensation in the plan, including commissions and bonuses, if applicable, and correctly applying profit sharing contributions and employer matches.

Ensure Section 125 Compliance. You must have a Section 125 plan, or “cafeteria plan,” in place if you allow workers to pay for benefits pre-tax. This includes contributions to flexible spending accounts, or FSAs. Note that rules for FSAs recently changed. Double check to ensure your plan observes the new limits.

Ensure 401(k) Deposits are Timely. You must keep your workers 401(k) contributions, made via payroll deduction, separate from your general funds, and deposit them with the fund or investment company or administrator on a timely basis.

Update your COBRA Plan Documents. Make sure that everyone eligible to receive COBRA has received all required notices, to include the dental and vision plans and FSAs.

Failure to comply with these federal laws can result in fines and lawsuits, as well as ill-will on the part of employees. Reviewing your benefit plans top-to-bottom at least annually should help you head trouble off at the pass.