Don’t Forget to Update Benefit Plan Documents
The new year came with notable compliance changes that may require updating group health plan materials. Employers should review these requirements and make the necessary changes to materials offered to participants at plan renewal.
The Affordable Care Act’s (ACA) Employer Shared Responsibility provision, also referred to as “Play or Pay,” took effect January 1, 2015. This date is fixed regardless of the employer’s fiscal year or benefit plan year. Under the Employer Mandate, large employers may be assessed a penalty for failure to offer health coverage to full-time employees if at least one employee receives a government subsidy to buy individual coverage through an Exchange (Marketplace). However, some employers may be able to take advantage of one or more transition relief provisions to avoid potential penalties for part or all of 2015 (and part of 2016, in some cases). For example, transition relief is available for certain employers with 50 – 99 full-time equivalent employees (FTEs) and/or certain employers with non-calendar year health plans.
Applicable large employers (ALEs) must ensure their group health plans are designed to meet minimum value and are deemed affordable to limit assessment of penalty. For plan years beginning in 2015, the required contribution percentage under the affordability provision is 9.56 percent. ALEs who have variable hour employees should establish and document their designated measurement periods for determination of “full-time” employees.
The Employer Shared Responsibility provision also establishes employer reporting requirements. For calendar year 2015, the first reports are due in early 2016. These reporting requirements include:
- Under I.R.C. § 6056, large employers must report information about health coverage offered to full-time employees.
- Under I.R.C. § 6055, large employers with self-funded plans must report information about the coverage provided to each individual.
ALEs should review their Summary Plan Descriptions (SPDs) to ensure measurement periods used in the determination of the employee counts are documented. To comply with the Employee Retirement Income Security Act (ERISA), the health plan’s SPD must describe the plan’s eligibility requirements. The SPD’s description of the measurement method should clearly define the measurement periods and plan eligibility requirements so that it is understandable to the average participant.
Another change under the ACA is the application of the final regulations under the Waiting Period Provision for plan years beginning on or after January 1, 2015. The final rule confirms the following specifics:
- Calendar days are counted in determining the 90-day period, including weekends and holidays.
- The employer defines the eligibility criteria.
- The time in which eligible employees take to elect coverage is not counted as part of that 90-day limit.
- If a person enrolls as a late or special enrollee, any time period before the enrollment date is not counted as part of the 90-day limit.
- Employers may require new hires to complete a reasonable and bona fide employment-based orientation period of up to one month. An orientation period is a probationary period during which the employee receives orientation and training. In that case, the waiting period begins upon completion of the orientation period.
- Rehired employees may be treated as new hires subject to the plan’s eligibility and waiting period requirements. The same applies to employees moving between eligible and non-eligible employment positions.
Employers should review their ability to maintain grandfathered status for 2015. If the plan will lose its status, the plan should include all of the additional patient rights and benefits required by the ACA for nongrandfathered plans (e.g. coverage of preventive care without cost‐sharing requirements).
Several indexed inflation increases have been announced, which may require updates to Summary of Benefits and Coverage (SBC) documents and other participant plan materials, such as contributions to health savings accounts (HSAs), out-of-pocket spending under high-deductible health plans (HDHPs), and essential health benefits (EHBs).
The annual cost-sharing and out-of-pocket maximums increase for plan years beginning on or after January 1, 2015. A health plan’s out‐of‐pocket maximum for EHBs may not exceed $6,600 for self‐only coverage, and $13,200 for family coverage.
The out‐of‐pocket maximum, however, continues to apply to all nongrandfathered group health plans, including self‐insured health plans and insured plans.
The minimum annual deductible and out-of-pocket expenses for HDHPs renewing on or after January 1, 2015 have increased in 2015:
- The minimum annual deductibles under an HDHP must be at least $1,300 for self-only coverage (up from $1,250 for 2014) and $2,600 for family coverage (up from $2,500 for 2014).
- The maximum out-of-pocket expense limit for self-only HDHP coverage for 2015 is $6,450, which is up from $6,350 in 2014. For family HDHP coverage, the maximum out-of-pocket expense limit for 2015 is $12,900, which is up from $12,700 in 2014.
The annual dollar limit on the combination of employer and employee contributions to HSAs increased to $3,350 for an individual with self-only coverage under a HDHP and to $6,650 for an individual with family coverage under an HDHP. This is up $50 dollars from the amounts for 2014.
The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSAs) rises to $2,550, up $50 dollars from the amount for 2014.
Under the small business health care tax credit, the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,800 for tax year 2015, up from $25,400 for 2014.
Employers managing compliance with benefits-related mandates under the ACA and other benefits rules for coverage, documentation and reporting requirements should be aware of applicable penalties that compliance failures may trigger. Potential fines and penalties vary depending upon the provision under Internal Revenue Code, ERISA, or the Departments of Health and Human Services and Labor rules. While these agencies are working towards helping plan sponsors comply with the new rules, compliance failures can be costly. Take the best approach and make it a new year’s resolution to be aware of the compliance requirements and develop plans for meeting them!