by admin | Nov 3, 2017 | Group Benefit Plans, HIPAA, Human Resources
Employers who are designing a health and welfare benefit plan for their employees often wonder about the rules relating to setting premiums for employees. Employers generally have significant flexibility in this part of their plan’s design. Common structures contemplated by employers include, but are not limited to:
- Charging all employees a flat amount for their health plan
- Charging employees a percentage of the premium for the health plan, with the percentage changing as employees move between tiers (self, self plus one, self plus family)
- Giving employees a set dollar amount that they can use to offset the cost of whatever plan and plan tier they enroll in
Employers are also interested in setting different contribution structures for different groups of employees. Sometimes this is due to a geographic difference between employees, job types, staff versus management, and more. Employers may wish to give lower-paid employees more employer-provided money; sometimes employers wish to give managers or executive staff more employer-provided money.
Employers should be aware that there are different nondiscrimination requirements to consider.
Generally, under HIPAA non-discrimination rules, employers have discretion when structuring their benefits plans and may make distinctions among employee populations regarding access to and the level of benefits offered. Plans may differ among employees only on “bona fide employment-based classifications” consistent with the employer’s usual business practice. Examples that would satisfy this requirement include salaried, hourly, full-time, part-time, type of job, geographic location, date of hire, division, subsidiary, business unit, and profit center distinctions.
If an employer’s proposed structure meets these basic HIPAA requirements, then the employer needs to review the applicable nondiscrimination requirements under Internal Revenue Code Section 125 (for cafeteria plans) and Section 105(h) (for self-funded plans). If the employer’s plan is subject to these rules, at a most basic level, the plan cannot favor highly compensated individuals. Sometimes an innocent plan design can lead to an employer failing the nondiscrimination requirements under Section 125 or 105(h) without the employer intentionally favoring the highly compensated employees. Many employers also erroneously assume that none of their employees fall into the “highly compensated” category, so the rules do not apply to them. As a best practice, any time an employer has a plan design with different levels of employer contributions, the employer should run the applicable testing to ensure its plan is compliant.
Under Section 125, benefit plans cannot discriminate in favor of highly compensated individuals or key employees.
By Danielle Capilla
Originally Published By United Benefit Advisors
by admin | Aug 24, 2017 | Benefit Management, COBRA, Compliance
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows qualified beneficiaries who lose health benefits due to a qualifying event to continue group health benefits. The COBRA payment process is subject to various rules in terms of grace periods, notification, premium payment methods, and treatment of insignificant shortfalls.
Grace Periods
The initial premium payment is due 45 days after the qualified beneficiary elects COBRA. Premium payments must be made on time; otherwise, a plan may terminate COBRA coverage. Generally, subsequent premium payments are due on the first day of the month. However, under the COBRA grace period rules, premiums will still be considered timely if made within 30 days after the due date. The statutory grace period is a minimum 30-day period, but plans may allow qualified beneficiaries a longer grace period.
A COBRA premium payment is made when it is sent to the plan. Thus, if the qualified beneficiary mails a check, then the payment is made on the date the check was mailed. The plan administrators should look at the postmark date on the envelope to determine whether the payment was made on time. Qualified beneficiaries may use certified mail as evidence that the payment was made on time.
The 30-day grace period applies to subsequent premium payments and not to the initial premium payment. After the initial payment is made, the first 30-day grace period runs from the payment due date and not from the last day of the 45-day initial payment period.
If a COBRA payment has not been paid on its due date and a follow-up billing statement is sent with a new due date, then the plan risks establishing a new 30-day grace period that would begin from the new due date.
Notification
The plan administrator must notify the qualified beneficiary of the COBRA premium payment obligations in terms of how much to pay and when payments are due; however, the plan does not have to renotify the qualified beneficiary to make timely payments. Even though plans are not required to send billing statements each month, many plans send reminder statements to the qualified beneficiaries.
While the only requirement for plan administrators is to send an election notice detailing the plan’s premium deadlines, there are three circumstances under which written notices about COBRA premiums are necessary. First, if the COBRA premium changes, the plan administrator must notify the qualified beneficiary of the change. Second, if the qualified beneficiary made an insignificant shortfall premium payment, the plan administrator must provide notice of the insignificant shortfall unless the plan administrator chooses to ignore it. Last, if a plan administrator terminates a qualified beneficiary’s COBRA coverage for nonpayment or late payment, the plan administrator must provide a termination notice to the qualified beneficiary.
The plan administrator is not required to inform the qualified beneficiary when the premium payment is late. Thus, if a plan administrator does not receive a premium payment by the end of the grace period, then COBRA coverage may be terminated. The plan administrator is not required to send a notice of termination in that case because the COBRA coverage was not in effect. On the other hand, if the qualified beneficiary makes the initial COBRA premium payment and coverage is lost for failure to pay within the 30-day grace period, then the plan administrator must provide a notice of termination due to early termination of COBRA coverage.
By Danielle Capilla
Originally Published By United Benefit Advisors
