Compliance Breakdown: Common Employee Benefits Mistakes For Employers
When it comes to benefits, it seems like the laws are always changing. You can be happily running your retirement plan and health benefits, thinking you’re doing everything right, then… you’re caught off guard by a new law (or laws) that gets passed, and suddenly you have to scramble and change what you’re doing so you won’t get into trouble.
So what SHOULD you be doing in order for you to remain compliant with your benefits? That’s the question I posed to Jessica Du Bois of Risk Strategies in a recent LinkedIn Live conversation.
KEEPING TRACK OF COMPLIANCE FOR EMPLOYEE BENEFITS: BEST PRACTICES
According to Jessica, you need a multi-faceted approach when it comes to compliance. There are three different areas to consider:
Your team - This includes you, your advisory team, and any outsourced service providers (e.g. legal counsel).
Your tools - A compliance calendar is a must, as rules and regulations are always changing. An online version of this tool is best so that you can keep up with new laws.
Another useful tool is a compliance portal such as Zywave or Mineral; benefits advisory firms often provide these at no cost to clients. These tools enable you to compare state laws, stay up to date on new laws, view templates of policies, and create an employee handbook.Your controls - These are your processes and procedures that you follow to make sure you’re staying compliant. One such procedure Jessica highly recommends is an annual audit.
What about the retirement plan side? The same type of multi-faceted approach comes into play:
Your team - You need a really strong advisor who can keep you on track and stay ahead of any important compliance deadlines, as well as a good recordkeeper or third-party administrator (or both). All of these providers should be able to keep you informed on best practices.
Your tools - A compliance calendar is important here, too, although fortunately when it comes to retirement plans, it hasn’t changed much in recent years.
Your controls - Knowing what your providers are doing for you, who has what responsibilities, and when you will get what information are all key; this will enable you to be able to check your compliance items off your list.
WHO IS TAKING CARE OF RETIREMENT PLAN COMPLIANCE ITEMS?
The recordkeeper or the plan third-party administrator typically handles compliance testing and anything else that interfaces with the DOL or IRS. Notices that have to be sent to employees are generally taken care of by the recordkeeper (although they do it in different ways - we covered that a bit here). The advisor is often charged with figuring out who does what so nothing falls through the cracks.
WHAT’S NEW IN 2023 FOR RETIREMENT PLAN/HEALTH CARE BENEFITS COMPLIANCE?
For retirement plans, SECURE 2.0 is the big one, and there are rolling deadlines for the provisions. The problem is that many still require guidance from the DOL or IRS on how they are to be carried out. It’s important to check with your recordkeeper to see what needs to be done by the end of this year in order to stay compliant with SECURE 2.0, but chances are they need you to be thinking about the catchup contributions and working with your payroll company right now.
Jessica shared several health care benefits compliance items that are impacting employers in 2023:
Gag clause attestation - This was meant to prohibit health plans from entering into contracts with providers that restrict quality of care data or claims data. As an employer, you (or your advisor, third-party administrator, or health plan carrier) must submit the attestation by December 31, 2023 to the Department of Health and Human Services.
Rx DC (Prescription Data Collection) reporting - This requires employers to submit pharmacy and health care spending data to CMS. This was due June 1, 2023, so if you haven’t done it, do it now! (Or have your third-party administrator or health plan carrier do it.)
Compensation disclosure form - This form is actually the responsibility of the benefits advisor, and requires advisors to annually disclose their compensation from carriers to clients.
Side note: Retirement plan advisors have had to disclose our compensation annually since 2012, mainly so that plan sponsors are aware of what they’re paying and so that they can determine whether the fees are reasonable in light of services received.State laws on paid family and medical leave - The national landscape with respect to this issue is varied – some states have existing laws that have been expanded, some have pending legislation, some have voluntary legislation. Employers need to audit policy and processes around paid leave this year in order to make sure they are staying compliant with state laws.
COMMON MISSED COMPLIANCE ITEMS
On the retirement plan side, the law is written such that plan sponsors must act prudently and make good fiduciary decisions. There are a lot of fiduciary responsibilities that we’ve covered before; it all comes down to two things:
Meeting the ERISA/DOL/IRS guidelines that exist
Running your plan according to the plan document
Documenting your decisionmaking process and your plan oversight is necessary in order to establish that you are doing the above two things, but oftentimes plan sponsors don’t do this. Meeting minutes, fiduciary files, adoption agreements, amendments, notices - employers need to have that trail of breadcrumbs in order to prove they are being compliant. If anyone comes in and starts asking questions, plan sponsors need to be ready with evidence of a well followed prudent process!
On the health plan side, Jessica says that many employers forget that they need to make decisions based on the best interest of those in the plan. (Health insurance is also covered by the Employee Retirement Income Security Act.) It might not be intentional, but healthcare is complicated, and employers need to stay on top of things and take their responsibilities seriously. Otherwise, you could be hit with a lawsuit from a disgruntled employee.
Side note: The law firm that has historically represented retirement plan plaintiffs, particularly in fee litigation suits, is currently running ads targeting participants in certain health plans. Keep your eyes out for what happens next.
HOW WOULD A COMPANY KNOW WHETHER THEY ARE MEETING THEIR FIDUCIARY RESPONSIBILITIES WITH THEIR HEALTH CARE OR RETIREMENT PLAN?
Documentation is extremely important on both the retirement plan and healthcare plan side of things, says Jessica. Healthcare spend, the decision making process, the solutions your advisor is providing - these are just some of the items you need to keep track of. The review process is especially important when costs have increased. Employers may just want to shrug and pass on the increased costs to their employees, but they absolutely need to make sure that they are truly acting in their best interests.
The same goes for the retirement plan. ERISA says you need to follow a prudent process. That starts with defining who the fiduciaries to the plan are, outlining responsibilities, how the investments are selected and monitored, employee communications, and holding regular review meetings. See the 5 things plan sponsors don’t always do, but should.
Other items that are often missed by employers include employee communications. There are a number of notices that need to be provided to employees on an ongoing basis or to new hires. Don’t forget the 5500 filing form! These are often missed by employers, as well. Check your company filings here: https://www.efast.dol.gov/5500search/
The easiest way to take stock? Pretend a DOL auditor just walked in and asked you to demonstrate how you oversee your benefits or retirement plans. What documentation would you provide? How could you show them you’re on top of it? (If you don’t have any, you might want to give us a call!)
WHAT COMPLIANCE-RELATED ITEMS CAN EMPLOYERS OUTSOURCE?
Don’t try to do everything yourself, says Jessica. Lean on your advisory team! She recommends outsourcing the costly, time-consuming benefit-related items such as ACA reporting, COBRA administration, and leave coordination. On the retirement plan side, notice delivery can be outsourced, as can signing off on the 5500, compliance items such as testing, and investment decisionmaking.
No matter what tasks you’re outsourcing - whether they fall on the retirement plan side or the health care side - you need to make sure your service provider has all the necessary information they need to get the job done. And please don’t think you can just sit back and do nothing if you decide to outsource; you still have a responsibility to review the process and make sure you and your service providers have checked all the boxes.
The retirement plan and the health care plan are probably the two most important benefits for employees. It’s up to plan sponsors to make sure they are being compliant in those areas and doing right by their employees.
You can find Jessica on LinkedIn, or email her at jdubois@risk-strategies.com. Reach out to her if you have questions about compliance, health care benefits, or even if you just need a mini-audit on your benefits.
And if you need a retirement plan advisor to help keep your plan shipshape, we can help! Email us at hello@retiremenplanology.com, and follow Courtenay on LinkedIn for more LinkedIn Lives!