You might not see benefits plans and policies featured on the cover of Martha Stewart Living or Real Simple, but spring is a great time to examine these plans and policies for compliance and consistency with your overall organizational goals and to strategically look at upcoming compliance requirements. Such a review is especially apt this spring in light of a fresh batch of health care reform regulations, new DOMA guidance from the IRS and an easy-to-forget HIPAA deadline.
My top five list of reminders for this year follows, so grab your plans and policies, a glass of lemonade and a place in the sun—who says spring cleaning has to be messy anyway?
1. Learn your employee count. Health care reform is a mess of requirements that apply to all employers, some employers or no employers at all. Many requirements are not triggered by employee count, but one big one—pay or play—is, and the count that matters is an employer’s employee count for the prior year. Pay or play begins to take effect in 2015, so your employee count now will help determine whether you need to comply with the resulting reporting requirements and whether you could be subject to penalties in 2015.
The employee count that matters here is a concept called “full-time equivalent” employees. To determine your count of full-time equivalent employees, begin by determining how many employees you have working 30 or more hours per week in a given month. Each of these employees counts as one for your employee count. Then, separately compute the total number of hours worked by employees working fewer than 30 hours per week in that same month. Once you have this total, divide it by 120. Add these two numbers together to get your count for a month.
Average employee count for a given year determines coverage under the pay or play rules in the following year.
2. Learn what employee count means. Counting employees is all about determining whether you are an applicable large employer for purposes of health care reform. The general rule is that employers with 50 or more employees in a given year will be required to comply with health care reform’s reporting requirements in the following year and may be subject to penalty payments if they do not offer health coverage or offer coverage that is insufficient or too expensive. However, transitional relief provides a reprieve for employers with a count of up to 99 employees in 2015. Like smaller employers, employers with 50 to 99 employees are not required to report in 2015 and will not be subject to penalties. Beginning in 2016, pay or play will apply to all employers with a count of 50 or more full-time equivalent employees.
3. Keep an eye on waiting periods. The period an otherwise-eligible new employee may be required to wait before being given the opportunity to join a company health plan is now limited. This rule does not require employers to provide a health plan, but all employers who do offer health insurance—regardless of size—are subject to maximum waiting period rules.
The general rule is that a waiting period cannot exceed 90 days—this means that coverage must be available as of an employee’s 91st day of employment and not the first of the month following the 90th day of employment.
This rule takes/took effect as of the start of an employer’s first plan year beginning on or after January 1, 2014. For employers with calendar-year plans, this was January 1, 2014, but final regulations on waiting periods came out much more recently.
The final regulations maintain rules allowing employers to require that employees complete a minimum number of hours (up to 1,200) or other non-time based requirements. In addition, new proposed regulations introduce a one month orientation period that can be stacked on top of the maximum waiting period.
Waiting periods are often addressed in employee handbooks, so even if benefit policies have been updated by an insurer, internal documents, like handbooks, may need updates.
4. Do not forget DOMA. In U.S. v. Windsor, the Supreme Court overruled that portion of the Defense of Marriage Act defining marriage as between a man and a woman, but guidance relevant to employers has been coming at a trickle from diffuse sources.
Most recently, the IRS released formal guidance addressing what plans will require a formal plan amendment to comply with the Supreme Court’s Windsor decision and the compliance date for those amendments. Plans that include language inconsistent with the Supreme Court’s decision are directed to operate in compliance with that decision now and to formally adopt a plan amendment on or before December 31, 2014.
Your 401(k) plan administrator or a benefits attorney can address your plan’s compliance, but watch for plan language that defines marriage as between a man and a woman or with reference to state law.
5. Hop on HIPAA. Last January, new HIPAA regulations extended many HIPAA compliance requirements to business associates and subcontractors. The initial compliance date under those regulations was September 23, 2013, but the regulators allowed entities an extra year to update those business associate agreements in place as of January 25, 2013. This additional year runs on September 22, 2014. For large covered entities and business associates, updating agreements can take some time, so now is a great time to check current agreements for compliance and get signatures on updated agreements as needed.
Iris Tilley is a Partner with Barran Liebman LLP where she counsels employers in all aspects of employee benefits. Contact her at 503-276-2155 or at itilley@barran.com.
