ERISA Sect. 408(b)(2) The Employer’s “Perfect Storm”

Just when you thought it was safe to put your 401(k) plan in the file cabinet, the Department of Labor (DOL) and ERISA have created a whole new set of obligations for you to manage! As a plan sponsor for a 401(k) Plan, it is important to take note about the impending “Perfect Storm” in 401(k) compliance, ERISA Sect. 408(b)(2).

This new legislation takes effect for plan years beginning January 1, 2012 and employers are required to be in compliance by August 31, 2012. Under this onerous law, plan sponsors and fiduciaries have 3 primary requirements relative to understanding and communicating plan costs to employees. This obligation as well as other plan design requirements under the law will be ongoing throughout the life of the plan. The burden for compliance is placed squarely on the back of employers. Simultaneously, the DOL has redoubled their efforts to audit 401k plans in the hunt for violations and sanctions.

In addition to a number of more subtle plan design and compliance requirements, the essence of this new law is that plan sponsors will be responsible for the following functions on a periodic basis:

ü Plan Sponsors/Fiduciaries must identify all plan costs and investment expenses as well as establish a clear understanding of what services each cost represents.

ü Plan Sponsors/Fiduciaries must assure that all the plan costs are reasonable and competitive in the marketplace.

ü Plan Sponsors/Fiduciaries must communicate all plan costs and investment expenses to their plan participants.

To learn more, our firm will be hosting a Webinar on March 15, 2012. We have invited an expert from the Department of Labor to share with employers the issues they will face regarding compliance and disclosure requirements. Information about the Webinar can be found on our website under the Events sections at www.ipswichfinancial.com. Or contact our office at 978.777.6554 to register.

Summary of Benefits and Coverage Final Rules

The Departments of Health and Human Services, Labor, and the Treasury (the Departments) have released the final rule and glossary implementing the Summary of Benefits and Coverage (SBC) requirements of the Patient Protection and Affordable Care Act (ACA). The final rule and related materials will be published in the February 14 Federal Register. As provided in the final rule, starting on September 23, 2012 with health plans upcoming open enrollment, health insurers and group health plans will be required to provide the SBC and the uniform glossary to consumers.

The SBC must be a concise summary (limited to four pages) of the key benefits and coverages provided through the health plan, the costs to the participant, lists of excluded services, and other significant conditions or limitations. These documents also must be prepared in a standardized format, type style, font size, and terminology so that comparisons can readily be made between different coverage offerings. The SBCs must be distributed in connection with any initial, special, or open enrollments, and any new plan coverages.

Specifically, the final rules ensure consumers receive two key forms that will help them understand and evaluate their health insurance choices:

• A short, easy-to-understand SBC; and

• A list of definitions (called the “Uniform Glossary”) that explains terms commonly used in health insurance coverage such as “deductible” and “copayment”

The final rules require that the SBC be provided to consumers as follows:

• when they are shopping for coverage;

• when coverage is renewed, before each new plan or policy year;

• when there are coverage changes, to enrollees 60 days before the effective date of the changes, and

• upon the consumer's request for information, within seven business days of the request (including the Glossary of terms).

The glossary and sample SBC is available at http://www.dol.gov/ebsa/

The forms, SBC, and glossary were developed by the Departments based primarily on model forms created through a public process led by the National Association of Insurance Commissioners (NAIC) and a working group including representatives of health insurance-related consumer advocacy organizations, health insurers, health care professionals, patient advocates including those representing individuals with limited English proficiency, and other qualified individuals. The forms also reflect comments that the Departments sought directly from the public.

The SBC will include a new, standardized health plan comparison tool for consumers known as “coverage examples” — using a format modeled on the Nutrition Facts label required for packaged foods. The coverage examples will illustrate, for comparison purposes, what proportion of the cost of care a health insurance policy or plan would cover for a sample patient for two common medical situations — having a baby and managing type 2 diabetes. Additional scenarios will be added in the future as feedback is gathered from consumers. These examples will help consumers understand and compare a sample patient’s share of the costs of care under a particular plan and have a better idea of how valuable the health plan will be at times when they may need the coverage.

The SBC can be provided electronically, allowing a plan or issuer to post the SBC on its website or provide it by email. Electronic disclosure is expected to reduce costs while consumer safeguards are designed to ensure actual receipt by individuals. Additionally, the final rule provides flexibility in the instructions for completing the SBC in recognition of unique plan designs, the Departments asserted.

The SBC will make it easier for health insurance consumers to find the best coverage for themselves and their families — and for employers to find the best coverage for their business and their employees, the Departments said. The new rules also will make it easier for people and employers to directly compare one plan to another. The next step is to hear from the insurance carriers about their proposed delivery of the SBC.

HR company publishes top 5 HR trends to watch for in 2012

As the business of HR continues to revolutionize and grow, many trends can be named for what is expected in the future. HR company CanopyHR Solutions has narrowed down the possibilities and compiled a list of the top five HR trends coming down the pike in 2012:

1. SaaS and cloud technology. Tech buffs are over the moon about cloud computing and Software-as-a-Service (SaaS), innovations that are reshaping the way HR technology functions. "The cloud" is where data and applications-including SaaS data and applications-can be remotely stored and accessed on demand from any device with Internet access. SaaS is also referred to as "on-demand software," a pretty straightforward description of both its function and its advantage. Users can now access not just files and data remotely, but the software they use to manipulate that data. This unprecedented access has the potential to revolutionize the ways companies manage critical HR processes and evolve HR to contribute even more to their success. Cloud computing streamlines recruiting, screening, payroll and both workforce and performance management, among other functions. It also allows for rapid deployment of pre-configured technology solutions and quickly connects HR initiatives throughout any size company. These are just some of what makes cloud technology such a powerful tool in both cost control and greater effectiveness.

2. HRMS implementation. Heaping additional duties on a busy HR team requires meticulous management. Technology saves the day again here with robust Human Resources Management Software (HRMS) programs. The best are designed to simplify tasks related to managing employees and workforces, although there are also features available to ensure compliance with tax laws and healthcare reform mandates. Automation and built-in controls help HR professionals maintain accuracy and increase efficiency-freeing them up for the additional responsibilities many HR departments are beginning to take on.

3. Going paperless. Early promises to go paperless failed to materialize, but technology has finally evolved to support the delivery of paperless workplaces in a practical way that works in the real world. Again, we have cloud computing to thank for these solutions, which allow for secure information sharing with designated HR personnel. Benefits abound. Secure information access helps facilitate telecommuting, an option that makes a company more attractive to some of the best employees. And by making that access more efficient-employees can store, search, retrieve, copy and send documents much more quickly-so, productivity also gets a big boost. Carefully designated access rights, tracking and routing increase the speed of business while simultaneously increasing accountability. The ability to retain electronic document copies is an easy sell among companies concerned about compliance with HIPPA, OSHA, the EPA and tax auditors, because failure to maintain proper documentation can often carry stiff penalties. The benefit to a green environment is obvious; less paper consumption and waste means lower costs-including costs to the planet.

4. Contingent workers. The search for an adaptable workforce and labor cost containment has sent utilization of contingent workers skyrocketing. The sector comprises consultants, temps, freelancers and contractors — those who can get the job done but aren't on the official payroll. Companies are finding that these flexible non-employees can bridge the gaps in skills and talent left by retiring Baby Boomers and a pared-down workforce. As independent talent, these workers aren't entitled to benefits packages and they're not subject to the same payroll taxes as permanent employees. Because they're not part of the organized workforce, this segment can provide challenges when it comes to inadequate technology and resources, poor data management and spotty communication of company policy. Ideal handling of a contingent workforce relies on HR pros with a solid understanding of their unique requirements.

5. Workplace wellness. A broken healthcare system and soaring costs have inspired countless employee-benefits managers to find new solutions that add options without piling on costs. Many are opting for wellness programs, which add a layer to health insurance offerings as well as lowering costs, increasing productivity and demonstrating a responsible commitment to employees. The surge in popularity of wellness programs couldn't come at a better time; Americans are struggling with preventable conditions like obesity, diabetes and respiratory health problems at record numbers. Those chronic conditions eat up as much as 75 percent of healthcare spending in the United States. Wellness initiatives target things exercise, quitting smoking and weight management. Companies that offer employee incentives for addressing these health concerns may find themselves with healthier, happier employees and insurance savings that could potentially offset the program costs.

Source: CanopyHR Solutions; www.canopyhr.com.

Staffing Decisions and The Conference Board Employment Trends Index (ETI)

Health reform law will boost demand and government costs, while expanding coverage

This article below from CCH, a leading provider of business news, provides insight into how Health Care Reform is performing to date and sheds light into what is expected through to 2014.

In 2014, the year that the Patient Protection and Affordable Care Act is set to expand health insurance coverage, growth in health care spending is expected to reach 8.3 percent, according to estimates by a group of economists from the Centers for Medicare & Medicaid Office of the Actuary.

The PPACA is expected to boost demand for medical services, particularly for prescription drugs and physician and clinical services, the economists noted. By 2020, the federal government’s share of health care spending will reach 31 percent (from the current 27).

Average annual growth in national health spending is expected to be 0.1 percentage point higher (5.8 percent) under current law compared to projected average growth prior to the passage of the PPACA (5.7 percent) for 2010 through 2020.

Total government spending, including federal, state, and local governments, is expected to reach nearly 50 percent in 2020. The number of uninsured will be lower by nearly 30 million. These projections are reviewed in the article, “National Health Spending Projections Through 2020: Economic Recovery And Reform Drive Faster Spending Growth,” published in the July 2011 issue of Health Affairs.

In 2010, health spending is estimated to have grown at the rate of 3.9 percent, and a total of $2.6 trillion ($8,648 per person) due partly to the recession which caused many people to lose their health insurance when they lost their jobs. Health spending in 2010 represented 17.6 percent of gross domestic product. At the same time, health spending by private sources grew by only 2.6 percent to $822.3 billion for insurance premiums and the number of people covered in private plans fell by 5 million. Benefits paid by private plans amounted to $725.5 billion, a nearly $100 billion difference from premiums paid. Out-of-pocket spending rose by only 1.8 percent as the cash-strapped population put off seeking medical care and treatment.

The CMS economists project that out-of-pocket spending will grow faster through 2013, by an average 3.2 percent annually, as the U.S. economy recovers and the number of people with disposable income rises, along with more employers offering higher cost-share plans. Plans covering individuals with preexisting conditions and the expansion of coverage for young adult children to age 26 will result in an additional 1.6 million individuals covered in 2013.

In 2014, about 22.9 million new insureds will have coverage through expanded Medicaid and the new state health insurance exchanges, leading to an 8.3 percent spending growth, but a 1.3 percent drop in out-of-pocket spending, the CMS economists projected. The spending due to the coverage expansion is expected to more than offset Medicare savings obtained through the PPACA. A recent Standard & Poor study of the national health index found that Medicare spending increase rate has slowed to 2.64 percent, even before the full implementation of the PPACA.

Also in 2014, the growth in private health insurance premiums is projected to reach 9.4 percent (4.4 percent higher than without the PPACA), as 13.9 million people get coverage through the new state health insurance exchanges. Private health insurance will account for about 31 percent of national health spending, about the same as without the PPACA.

Because many of the new insureds will be younger and healthier and less likely to use hospitals or other more intensive services and the coverage expansion will allow a shift to preventive services, from more costly treatment for delayed, necessary care. Thus, by 2020, spending for prescription drugs and physician services will represent a higher share of health spending, 11 percent and 19 percent, respectively, while the share represented by hospital spending will drop to 30 percent. The excise tax on high cost health insurance plans likely will slow the growth in use of medical services and health spending beginning in 2018, as plan sponsors work to shift employees to lower cost, less generous, plans. While the share of national health expenditures will increase to 49 percent for governments (31 percent federal and 18 percent state and local), the share paid by private will fall to 18 percent, while households’ share will stay the same at 26 percent.

Looking for Ways to Save on Health Insurance Premiums

Dependent Eligibility Verification can help to reduce the cost of providing medical benefits and stem the rising tide of health are costs by identifying and removing ineligible dependents enrolled on the plan. According to Michael Smith, CEO ConSova, Inc., demand for dependent verification over the past few years has increased dramatically. "Employers have begun to realize the tremendous savings audits and verification can deliver in a relatively short time, especially just before open enrollment." Smith says there is a common misconception that identifying and validating eligibility is a long-term and cumbersome process. In a typical Dependent Eligibility Verification audit, employers can find an average of 10-13 percent of covered dependents to be ineligible, and removing these generates an almost immediate cost savings. Employees' former spouses typically represent 25-30 percent of ineligible dependents identified, and they represent roughly 52 percent of the overall savings generated by the audit. Dependent eligibility verification is one of the top three health care cost containment solutions that can help companies save real money right away. To learn more on how to conduct a dependent eligibility audit, please contact our office at 978.777.6554 or cwatkin@ipswichfinancial.com

COBRA Subsidy Extended Through May 2010

Please be advised that the COBRA subsidy program has been extended through 5/13/2010. This is the third extension through the Continuing Extension Act of 2010.

Special Election Period

A health plan must extend a special COBRA election period to an individual who experienced an involuntary termination of employment on or after April 1, 2010, and prior to April 15, 2010, and who would be an “assistance eligible individual” (AEI) but who does not have a COBRA election in effect on April 15, 2010. The special election period runs from April 15, 2010, through 60 days after the Notice of Special Election Period is provided to that individual.

Notice of Special Election Period

In the case of any individual who experienced a qualifying event related to a termination of employment between April 1, 2010 and April 15, 2010, an employer must provide the general COBRA notice, including a description of the availability of premium reduction in the case of a qualifying event that is an involuntary termination of employment, within 60 days of enactment of the Act or by June 14, 2010. If the general COBRA notice was already distributed, then employers may simply supplement it with an additional notice describing the extension of the availability of premium reduction with respect to involuntary terminations through May 31, 2010, and the special election period.

A Reminder – Expansion of Assistance Eligible Individuals

Under previous legislation, only individuals who experienced a qualifying event that was an employee’s involuntary termination of employment could become AEIs and take advantage of the COBRA premium subsidy. The Temporary Extension Act of 2010 expanded the premium subsidy to include as a qualifying event for purposes of the subsidy, a reduction of hours that occurred at any time on or after September 1, 2008, and is followed by an involun¬tary termination of employment that occurs on or after March 2, 2010 (and before June 1, 2010). Individuals who experience a qualifying event that falls under this expanded definition and are otherwise eligible AEIs will be eligible for the COBRA subsidy beginning with the first day of the first period of coverage for which the individual is affected.

Action Items

>>Notices. Employers should update their COBRA notices and other plan communications to include the extension of the eligibility period to May 31, 2010.
>>Assess Prior Terminations. Identify covered employees (and their qualified beneficiaries) who became eligible for COBRA on or after April 1, 2010, and before April 15, 2010, as well as their COBRA elections. Provide an updated COBRA notice to these individuals that includes a description of the extended eligibility period and the special election period. Identify those employees and beneficiaries in the group whose qualifying event is the employee’s involuntary termination of employment and who are eligible for the COBRA subsidy.