Effective Compliance Measures

Compliance measures need to be discussed in the cost management realm. The Affordable Care Act has created a compliance nightmare for any group that is providing employee benefits to their employees.  Much of the media focus on the ACA has centered on what must be offered under the ACA but very little about how you are now required to offer plans.

For the examples below we will use a 100 employee group that has been out of compliance for 2 full years and has been offering coverage for the past 10 years.

  • An offer of coverage must be provided at least annually. If found that an offer of coverage was not provided to the employee then the employer would be found in violation of the subsection (a) penalty under the ACA.  The fine would be $280,000.
  • If a group offers benefits on a pre-tax basis they must provide an election form each year showing employee’s elections. If those documents cannot be provided the employer would be found in violation of the IRS code section 125.  The penalty would be the repayment of any and all benefits of pre-taxing benefits back to plan inceptions (roughly $150,000 in this case).
  • A Summary of Benefits and Coverage must be provided to each eligible employee. The summaries can be provided by the insurance carrier but must be distributed by the employer.  Each failure would incur a $1,000 penalty.  The fine would be $200,000.
  • ERISA – This law, first enacted in 1974, is a compliance proposal all in itself. However, it important to note some key requirements that may need to be addressed.
  1. Plan Document must exist for each plan
  2. Plan terms must be followed and strict fiduciary standards adhered to.
  3. Summary plan description (SPD) must be furnished automatically to plan
  4. Summary of material modifications (SMM) must be furnished automatically to participants when a plan is amended.
  5. Form 5500 must be filed annually for each plan (subject to exemptions, especially for small plans)
  6. Summary annual report must be furnished to plan participants for any plan that files a form 5500
  7. Claim procedures must be established and carefully followed when processing benefit claims.
  8. Plan assets, including participant contributions, may only be used to pay plan benefits and reasonable admin expenses.
  9. Group Health plans must conform to applicable mandates such as HIPAA and COBRA.

Under ERISA any person who exercises discretionary control regarding the management of a plan, its assets, renders advice for a fee, or has discretionary responsibility in the administration of the plan is considered a fiduciary and as a plan fiduciary they are personally liable for a damage done to a plan up to and including special fiduciary penalties assessed by the DOL or even criminal penalties.