Avoid these 5 common pitfalls
Most private-sector employers are ERISA plan administrators for the health and welfare plans they sponsor. This means they have bottom line responsibility for complying with the federal laws that regulate their plans. While TPAs and Insurers may assist with federal compliance tasks, the employer retains the liability if they are not done and done correctly.
As an adviser, are you serving your clients if you recommend a health plan, but dont fully inform your client of the legal obligations that go along with it? Think of the value you can add by taking the next step and actually helping them with the compliance process or finding the tools that will put a compliance process in place.
Eligibility gaps are common and can be costly to employers. The most frequent mistakes include failing to:
- Clearly identify eligible employees
- Clearly define eligible dependents
- Address inconsistencies between leave policies and plan provisions
- Monitor and enforce eligibility rules stated in plan documents
Eligibility rules inevitably become adviser issues due to an advisers role in securing coverage. No one else, except for your client, has the vantage point that you do. Therefore, advisers can add tremendous value by ensuring clear and consistent eligibility provisions across all lines of coverage.
Health care reform has added new coverage mandates, notice requirements, disclosure requirements and plan status requirements to an employers already overwhelming list of compliance responsibilities. In addition, the complexities of this legislation may actually increase as insurance exchanges, pay or play rules and assistance programs come into effect.
Employers were struggling with compliance long before health care reform came along. Now, many of them are desperate for a solution. If you, as their adviser, are not able to provide them one, they will certainly look for it somewhere else.
As the ERISA plan administrator, the employer is legally responsible for preparing and distributing much of the documentation that defines its health plan. This is one of the most important areas of compliance, because if there is ever a benefit dispute, the documentation rules. Any employer that hasnt been paying keeping up with this can get some very unpleasant surprises.
Unfortunately, many employers simply dont like documenting their plans they see it as tedious and time consuming (and it is hard to disagree). This creates a golden opportunity for advisers, because they are in the best position to understand a plans documentation requirements. Helping your clients with this task takes a true burden off of their shoulders.
Reporting and disclosure is all about transparency for the plan and the participant. Benefits are an extremely important and expensive component of an employees compensation and they expect them to be administered fairly and aboveboard.
Fines for reporting and disclosure failures can be costly. For example, the fine for not filing a Form 5500 is $1,100 PER DAY. Whats more, some researchers estimate that only about half of the required 5500s are being filed. Advisers should never let this be a vulnerable spot in their service to their clients. Be sure to help them establish a process for filing and distributing all required forms and notices.
With all of the rules and regulations governing benefits delivery and administration, industry pros can be left feeling like they are traversing a minefield. However, knowledge is power. So, the first step to avoiding benefits biggest pitfalls is knowing what they are. Weve outlined five of them for you here.