On April 2, 2018, significant changes to ERISA’s disability claims procedures will take effect. These new rules will require all ERISA-covered plans which provide disability benefits to make significant modifications to the way disability benefit claims are reviewed and decided. This post describes what is changing and why, and the steps employers must take now to ensure compliance.
Health and welfare have been around for a long time, and they are ubiquitous. Employees have come to expect medical, dental, life, and other insurance as part of their benefits packages. Employers offer coverage in order to reward employees, attract the best talent, and now, under the Affordable Care Act, avoid penalties. Historically, these plans posed few regulatory concerns for employers, despite that the applicable laws and regulations have become increasingly complicated with each passing decade. With the enactment of the Affordable Care Act, however, the applicable legal and regulatory concerns have reached a tipping point. The burdens of compliance and the penalties for non-compliance are now more ominous than ever. This post examines the compliance environment of health and welfare plans generally and group health plans in particular.
When it comes to telling their employees about certain benefits, many employers have for decades (since 1974 to be exact) flouted a particular provision of the law with impunity. The law to which we refer is the Employee Retirement Income Security Act (ERISA), and the provision relates to the requirement that the employer tell employees about the salient plan terms by providing them with a Summary Plan Description or “SPD.” The Affordable Care Act alters the regulatory landscape on this score. And while the ACA did not change the requirements that apply to SPDs, it radically changes the surrounding compliance environment. Complying with the SPD requirements all of a sudden looks not only like a good idea, but it also rises—dare we say—to a best or at least highly recommended practice.
In response to this changing environment, we recommend using a “wrap document,” which as we explain below, allows employers to satisfy the ERISA SPD and other disclosure requirements.
Many applicable large employers—i.e., employers that are subject to the Affordable Care Act’s (ACA) employer shared responsibility rules—have a pretty good sense of what these rules are, how they work, and what they plan to do to comply. A subset of these employers has gained a sophisticated understanding of the employer shared responsibility rules, while another (hopefully much smaller) subset has only a vague sense that they need to do something by or in 2015 in connection with extending coverage to full-time employees.
Employers with large groups of employees who were previously not offered coverage, or those with large variable and contingent workforces, have generally been relieved to learn that, in the case of employees with unpredictable hours, they may be able to determine the employee’s status as full-time using the “look-back measurement method.” (For a description of the look-back measurement method, please see the IRS’ “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act,” Question 15). Even after having the particulars of the look-back measurement method explained to them more than once, the H.R. and finance professionals with front-line responsibility for compliance sometimes confess confusion about how these rules work. And even among those with a firm grasp of the particulars, there remains a lingering worry. Once management and H.R. have a grasp of the rules and have settled on a compliance strategy, they must next figure out how to explain the rules to employees in a way that complies with applicable law and actually works for employees (the two are not necessarily the same).