Confused by all the alphabet soup—ERISA, COBRA, ACA, FMLA? You’re not alone.
Watch this recorded webinar for a friendly, expert-led breakdown of the top rules and regulations that govern your employee benefits. Whether you’re new to HR or just due for a refresher, we’ve simplified the most important regulations for you, and provided tips you can use right away.
Hosted by Jeff Plakans, President and Founder of Commonwealth Payroll & HR, this session features subject matter expert from isolved, Carla Adams, Director of Benefit Services.
The key compliance topics addressed include:
- ERISA – What fiduciary responsibility really means, and how to meet plan requirements
- COBRA – How to avoid common (and expensive) continuation coverage errors
- ACA – How to stay on top of employer mandates and reporting obligations
- FMLA – Manage leave policies that align with federal rules
Whether you’re an HR leader, benefit administrator, or small business owner, this recording will leave you better prepared to manage compliance and avoid costly pitfalls.
This webinar was recorded live on Thursday, August 8, 2025
Session Transcript:
Jeff Plakans (00:00:04):
Good afternoon everybody. I’m Jeff Plakans. I am the founder and president of Commonwealth Payroll and HR. Thank you for joining us here at your lunch hour. For you folks on the West Coast, maybe a little bit before your lunch hour. We are today going to tackle one of the ugliest but one of my favorite topics for employers. Today we’re going to cut through the compliance ignorance. We’re going to focus on Ben admin, rules that are made simple. Why is this important? We’re out there with clients all the time, and as payroll companies we see lots of things with clients that have been repeated challenges from over the years. We see pre-tax deductions that are taken, and occasionally we’ll stop and ask our employers, “Hey, why is that pre-tax?” And of course, we’re checking it to make sure that all our numbers are right, but we get into deeper questions about, “What kind of plan is this that makes it pre-tax?”
(00:01:15):
And often we get blank stares and answers like, “Well, the people from the other payroll company we did business with eight years ago told us to do it that way.” What that tells me is lots and lots of employers don’t really understand that there’s a huge gap that exists around how you maintain benefit plans, how you maintain compliance around benefit plans. And we’re very, very lucky to be partnered with the folks at isolved Benefits to help keep our clients in compliance and to keep us on the up and up. And that’s what today’s session is all about. So, today we’re joined by Carla Adams, the Director of Benefit Services at isolved. We’re supposed to be joined as well by Vicki Burke. She is the national sales Director at isolved for isolved Benefits. However, she’s caught in traffic somewhere. We’re hoping, fingers crossed that she’s going to come and join us later.
(00:02:17):
Now, just a few things about our session today. We are recording the session. For those of you who aren’t actually here and listening to me right now, but might be listening to me in a future watch of this recording, yes, this recording will come to you. So Carla, why don’t you take the floor and tell us a little bit about what we’re going to cover today.
Carla Adams (00:02:40):
Yeah, absolutely. Here’s a quick snapshot of what we’re going to be talking about. Jeff at the beginning started with why, and we’re going to talk a little bit about the why health and welfare compliance is so important. We’re also going to talk about specifically who is impacted, who are the different stakeholders when it comes to benefits compliance. Then I’m going to give you some idea of what happens when there’s non-compliance. Obviously, you’re not doing that on purpose, but employers find themselves in situations from time to time where they thought they were doing things the right way and they learned that they were not. So, what happens then? And then we’re going to wrap up at the end with a few tips and tricks or best practices that you can take away.
Jeff Plakans (00:03:33):
Awesome. One thing I want to make sure everybody knows, down at the bottom of your screen there is a section called Q&A. Now, as you watch Carla’s presentation and the discussion that we have together, you’re going to have a couple of oh moments. You’re going to be, “Does that apply to me? Wait, no, that doesn’t apply to me.” We want to wrap up today with a great Q&A session, not silence. I know you guys are out there. Don’t worry, I’m not going to call anybody out by name. Throw your questions into the Q&A. We will be tackling them at the end of this session. So Carla, thank you.
Carla Adams (00:04:16):
Okay, awesome. Let’s get started. When we think about compliance related to employee benefits. First of all there’s a tremendous amount of compliance that employers have to deal with regardless, whether it’s related to HR or other factors. But as we bring it in and focus on compliance for benefits in general, and we’re not going to cover the full spectrum today of every single compliance law that impacts an employer. That would be more like a 10-hour course, and I know you don’t have time for that. But we are going to cover some of the main stays related to benefits compliance. And it’s important when you’re looking at that, that you know who the stakeholders are, and who is involved. Because these laws are directed at compliance for different individuals. So, you’ll notice that I have employers and employees on there, and you may be wondering, “Well, employees, how does it impact employees?”
(00:05:31):
Well, so many of the laws, Section 125 plan laws for instance that Jeff was talking about earlier, there are expectations of employees to handle things a certain way. So, not just employers, but employees. And employees can actually have an issue with compliance as well if they are not being honest about circumstances. There’s a variety of different situations where employees could get hung up and lose their tax advantage. HSA, Health Savings Account is another big one that if an employee is not enrolled in a qualified coverage, or if they have some other non-qualifying coverage with another employer, that it makes them lose their tax advantage. So, it does impact employers, it impacts employees, it impacts your insurance agents and your advisors, as well as the organization and the company as a whole. So, we’re going to be talking about all of those different areas that we touch on.
(00:06:44):
Now, failure to comply with state and federal laws, we can see enforcement from multiple different ways. So, certainly there are statutory penalties for a number of the laws that we’ll be talking about today. But sometimes enforcement comes through lawsuits, sometimes it comes through audits or investigations. IRS does audits. Department of Labor does investigations. There are other means of government enforcement. In some instances you can be in violation of a state or federal law, and it can actually give the insurance carrier an opportunity to deny claims, because you weren’t doing what you were supposed to do on your part. And I find a lot of employers are not aware of that, that some of the steps that they need to take if they’re not taking those steps. In some instances it means that the carrier can deny claims. Impact to your tax advantage plans. And then there are circumstances where there absolutely are criminal charges, that comes into play typically when it’s a willful disregard situation.
(00:08:02):
I mean this is a bad actor. It’s not somebody who had an accident and didn’t know what they were doing. It’s somebody who is purposely violating the law in those instances. So, a employer can see that enforcement come through fines, penalties, lawsuits, those are the most common. A benefit plan, so the benefit plan itself can be found to be out of compliance and have all the tax advantages removed. Participants may have issues related to eligibility or tax consequences. Carriers themselves can face fines, penalties, lawsuits. And then same thing with covered entities related to HIPAA, penalties and lawsuits. And then agents can face errors and emissions claims or lawsuits as well. So, you can see there’s a lot of parties here that are involved in benefits compliance. And this is really the why of why we do these education sessions and why we try to make sure that everybody knows what to do.
(00:09:21):
We’re going to start at, this is what I consider to be one of the bedrock laws related to benefits compliance. It’s been around a long time since 1974. And it governs both retirement plans and health and welfare plans. However, it governs them a little differently. When we’re talking about retirement plans, the record keeper for the retirement plan has key responsibilities that they’re supposed to fulfill. And this is one of the reasons why that it’s very common that we’ll find employers are good to go with their retirement plan. They’re doing everything that they’re supposed to do, but when it comes to their health and welfare plan they’re not. Because they did not know that they were subject to a risk and they did not know that there was something additional that they were supposed to do.
(00:10:23):
So, numerous laws since 1974 have included amendments to ERISA. We see this happen on the regular basis that a new law will be passed, whether it’s an appropriations act or some other form of act, and it will come in and amend ERISA. It’s one of those things that compliance with ERISA is not a one and done. It’s one of those things that you have to stay on top of, and it applies to private sector employers. So, government entities are exempt, church plans are exempt. Nonprofits are not exempt, it’s only church plans. Now, a few years back, there was a case that made it all the way to the Supreme Court and the Supreme Court’s ruling on that case made the concept of a church plan a little trickier than what our understanding of it was before that finding.
(00:11:36):
So, prior to that Supreme Court finding, it was a basic understanding that if you were combining together your actual church employees with say employees of a school that you have at the church, or some other type of entity, that the church itself is exempt but the school is not. Depending on the facts and circumstances and there’s a test that you have to go through. That was the general understanding. This Supreme Court case basically just made it about as gray as it could be, but in favor of churches, not against them. And so, it’s how these laws evolve as we go. And by the way, just so you know, because if you’re sitting here listening to me and you go, “Okay, well what in the world is ERISA even?” We’re going to go over all of the key things that you need to know about this and who’s subject to it, other than just private sector employers.
(00:12:46):
Cafeteria plans. Concept of a cafeteria plan came about through Section 125 and it allows employees to choose from taxable or non-taxable options is the best way to say it. This has been amended a number of times as well. So, it does allow for the premium conversion or the pre-taxing of a wide variety of benefits that a employer is … I’m sorry, an employee is paying for. And I will say that it does allow, there are restrictions on when you can make qualifying event changes, but it does allow for opportunities to make those mid-year plan changes as well. There are certain individuals that are ineligible to participate in a cafeteria plan. Those same individuals are ineligible to participate in a health reimbursement arrangement as well. Those are sole proprietors, partners in a partnership, more than 2% shareholders of an S-Corp and their family members by attribution. Those individuals are ineligible to participate. And so, when you are looking at setting up your cafeteria plan, and when you’re looking at enrolling, you do have to make sure that you’re not allowing ineligible individuals to participate.
(00:14:34):
And now we’re moving into the ’80s with COBRA, Consolidated Omnibus Budget Reconciliation Act. We just had another recent Budget Reconciliation act that just went through. I was just glad that they didn’t use a C word at the beginning of it so that we get confused about COBRA. So, with COBRA, it acted in ’86 and includes requirements for portability of health and welfare benefits. Now, prior to COBRA, if you were making a job change and you were somebody that had a serious health condition, you didn’t have a lot of options, you certainly couldn’t continue your group coverage. And you didn’t have as many options if you had pre-existing conditions for getting coverage without getting it from another employer. And so, COBRA was really an excellent law that brought forth that flexibility that if you’re in between jobs or you have other forms of life changes, that you are able to go ahead and make those changes.
(00:15:46):
So, most of the compliance failures related to COBRA tie to either notices, because there’s multiple notices that have to be sent out throughout the life of a participant, as well as a employee. Or failure to offer it at all. That’s where we see most of the issues that come about. It applies to private sector employers, and also it doesn’t apply to federal government, but it applies to state and local governmental entities. Church plans are exempt again, and this applies for employers that have 20 or more employees on average on most of the business days in the preceding calendar year. And so, there’s a calculation to look at that and see if you fall subject to COBRA. Many states also have a form of mini-COBRA, which does apply to groups that are under 20 lives.
(00:17:17):
And Family Medical Leave Act. It allows for up to 12 weeks of job protected unpaid leave and benefit continuation for eligible employers and eligible employees. It does have notification requirements, leave administration requirements, and a requirement that employees be allowed to continue certain benefits.
(00:17:46):
FMLA is one of those tricky ones, because employers are expressly forbidden from taking actions that could be deemed as interference or retaliation against employees for taking FMLA leave. Most of the lawsuits that we see, and you do see a high number of lawsuits related to FMLA violations, it really boils down to a lack of understanding of the requirements and administering. It also boils down to some of the habits we get ourselves into. So, some of the most egregious expensive lawsuits that I have seen really came about because of how a manager or supervisor behaved themselves when they were handling the situation. And the types of things that they were saying that made it clear when they terminated the person, that this was retaliation. That they were absolutely retaliating against them for exercising their rights. So, often there can be an intersection with other federal laws such as ADA, and so, an employer may be rightly denying leave for somebody who’s requested FMLA leave, but the reality is, they would be eligible for some sort of accommodation or situation under ADA.
(00:19:25):
And so, you really can’t look at things in a vacuum. So, FMLA applies to all government entities, regardless of the sites. When it comes to private sector employers, it applies to private sector employers that have 50 or more employees. And there is a little bit of nuance to that. Now, the nuance actually has changed a little with remote work because there’s actually special rules for how to treat remote workers. But with FMLA in that 50-employee count, if you have a single work location that’s looking at, do you have 50 for that single work location? But if you have multiple locations, it’s looking at, do you have 50 or more within a 75-mile radius of one another? But then if you have multiple locations and you have remote workers, you look at the remote workers based on what is the location that they report to. So, you can see the complexity there in trying to figure out how it applies and who is subject to it at the same time.
(00:20:56):
Then we have of course the Affordable Care Act and I am one of probably a small number of Americans that have read the Affordable Care Act from front to back, and I’ve read it from front to back multiple times. And no, there’s nothing wrong with me, but I think you’re probably thinking there’s got to be something wrong with that lady. It was lot to unpack and a lot to understand, and I knew I would have to answer a lot of questions on it. And so, it was very important for me to dig in and do that. But it passed in 2010. It was implemented in stages over about an eight-year period. An absolutely huge bill, impacts employers, employees, insurance companies, healthcare providers, medical device manufacturers, all of it. And it’s very complex to deal with. What we are going to focus on today is not the bulk of the Affordable Care Act, but we are going to focus on the reporting aspects of the Affordable Care Act. Because this is an area where we see very high non-compliance amongst employers.
(00:22:14):
And I was telling Jeff earlier this week, assigned to us that the IRS is in enforcement mode for the Affordable Care Act is when we start getting calls from employers who have received a letter saying, “Hey, we believe that you’re subject to the Affordable Care Act, and you didn’t report.” And right now they appear to be enforcing for 2023 and 2024 at the moment. Let’s look at how these laws impact different companies. And we’re going to do that by size. First and foremost, that little one to 19 category, it surprises some small employers to learn if they’re a private sector employer and they’re offering benefits that are subject to ERISA, they are subject to ERISA. Their requirements will be different than the larger employers to a small degree, but they are subject to ERISA. They’re subject to ERISA’s written instrument or plan document requirement. They are also subject to ERISA’s fiduciary duties requirement.
(00:23:35):
So the plan sponsor employer is a fiduciary for the plan and has to operate the plan in the interest of the participants. And it also comes into play ERISA and the ACA. Some of the provisions of the ACA come into play when you’re getting any sort of rebate. After the ACA passed, we knew that there were being medical loss ratio, rebates were going out. And one little tidbit that I’ll give you about that is if you get a rebate funds returned from the carrier, those are plan assets. And if you don’t have in your ERISA document how you handle those types of funds being returned to the plan, it’s more restrictive. What you can do with it. You have to put it back toward the benefit of the plan participants is essentially what you have to do.
(00:24:41):
So state continuation, obviously if you’re in a state that has a continuation requirement, it’s going to be similar to what we discussed with COBRA. However, all of the state’s continuation requirements look different. Some of them more closely mirror COBRA, some of them do not, and they have a shorter time period. Some of them not only apply below the 20 threshold, but they’ll have another extension past the COBRA timelines as well. So, it’s really important to know what the state continuation requirements are in your particular state. And then we see the 1094, 1095 reporting, and I have that on one to 19. And somebody out there is thinking, “Wait, I thought the Affordable Care Act only applied to large employers 50 plus. Why would a one to 19 employer have to do 1095 reporting?
(00:25:44):
Well, first of all, for these under 50 employers that I have there that have to do the reporting, that is only when they are offering some form of self-insured medical, whether that’s a truly self-insured medical or whether it is one of those level funded plans. If they’re offering, and it also applies if they’re offering an ICRA, an Individual Coverage HRA, if they’re offering any of those and they fall under that threshold, they are required to do what is called the B reporting. It is actually a little different than the C reporting that is done by applicable large employers.
(00:26:33):
And it is looking at participants in the plan. It’s not looking at the population of employees, it’s looking participants in the plan and their dependents. So, it’s important to note that if you’re offering any of these types of coverages that you are required to report. If you’ve not received a letter, it’s because I don’t know that they have figured out enforcement on this yet. Because they can’t just cross-reference with W2s, because you could offer no coverage, you could offer self-insured coverage, you could offer fully insured. So, it’s not as easy for them to figure this piece out.
(00:27:20):
I think most small employers probably don’t have to lose any sleep about it at the moment, but it is a very important thing for if you know what the right thing is to do, go ahead and get it in place to protect yourself going forward. And then of course, if you’re allowing for pre-taxing of premiums, then of course you need a section 125 plan in place. This, by the way, I had a group last year and I never thought about it this way. But they went through and set everything up with their payroll company and the payroll company set everything up for pre-tax, but at no point in time did they have an understanding that that plan document was a requirement. Nobody had ever talked to them. It wasn’t this payroll company, I’ll tell you that. Nobody had ever talked to them, and they just didn’t know. And so it was a little daunting. So, this is one of the reasons that I make sure that I tell groups about this.
(00:28:27):
The only difference that you’re going to see with the one to 19 and 20 to 49 is that that is the threshold where COBRA comes into play and you have to comply with COBRA. So, jumping up to 50 to 99, still we’ve got ERISA compliance for private sector. We’ve got COBRA. Now at this threshold we have the 1094, 1095 reporting, which is the C reporting that has to be done. Now, this is another point that I find sometimes groups are confused about. So, there are employers that are over that 50 mark that have made the decision that, “Insurance is entirely too expensive. I am not going to provide insurance.” And they think they don’t have to do this reporting. Or they spoke with a carrier rep, who was not knowledgeable” and the carrier rep said, “Oh, we do that reporting.” Nope, the carrier does reporting that they are required to do. And their reporting by the way is B reporting, because B reporting is done by providers of coverage, which is fully insured carriers, and then those non-ALE under-50 self-funded employers.
(00:30:02):
If you have 50 or more full-time equivalent employees, you are required to do this reporting, even if you made the decision to not offer coverage. You essentially have to tell the federal government on yourself that you’re violating the employer shared responsibility provisions of the ACA, and choosing that you’ll just let them penalize you instead of offering coverage. That’s basically what the requirement is. You have to tell on yourself, and there’s a penalty that applies if you don’t tell on yourself and report. So there’s employer shared responsibility provisions and then there’s the reporting provisions and each of them have their own separate penalty that applies. And so failing to do this piece right here can be very, very expensive. And we get calls from employers all the time that they didn’t know they were supposed to do this. And depending on their size, they’re receiving letters that are on the smaller side, maybe a few thousand, 10, 15, 20,000 working with a group.
(00:31:19):
Recently it was around about 175,000. I have seen letters that were hundreds of thousands of dollars for some groups of various sizes. And so none of these penalties are fun obviously, but this is one of those things. This is an easy thing that you can take care of and take off of your plate. And then we have of course, FMLA and FMLA applies for those private sector employers that are 50 more. Now the one change between the 50 to 99 and the 100, is once you have more than 100 enrolled old employee participants, you’re looking at how many, I like to tell people like this. How many unique enrolled employee participants do you have in the plan overall. If you offer medical, dental, vision, life, disability, so on and so forth, you’re going to have some people that take medical, some that don’t.
(00:32:30):
You’re going to have some that take dental, some don’t. Some take vision, some don’t. And depending on your eligibility categories, you may not necessarily have life on everyone. So, you can’t really just look at a single one of those offerings to determine if you’ve crossed that threshold. That’s not a good metric to go by. What you need to look at is, how many of your employees are enrolled in any part of the plan, and that’s the metric that will help you figure out if you are subject to it, and what you have to do. Now, they have never added a statute of limitations on ERISA, and we’ve already talked about, it goes back to 1974. So when an employer meets somebody and they say, Hey, we had this happen on a group this week. Another broker was coming in trying to take the business, and the broker said, “Hey, I looked your company up on free ERISA. I see that you’ve been totally compliant with your retirement plan. I don’t see that you have ever filed for your health and welfare plan. Do you know if you were subject to the filing?”
(00:33:50):
And kind of talked them through it. And so we start digging in and looking at it to try to help them figure out what to do. On the low end. We estimate that this company is looking in the neighborhood of $30,000 in penalties, but that’s only if the Department of Labor were to come in and investigate. And the reason for that is I wish for the other laws, they had this. For ERISA they have this wonderful compliance program called the Delinquent Voluntary Filer program. That if an employer says, oops, I had no idea I was supposed to do this, and they need to go back several years and file the annual 5500 that they can go, and they can do that program and it caps their penalty for multiple years, it caps their penalty at 4,000. If they’re only late for one year, it will be from a few hundred up to about 2000. But for multiple years they cap it at 4,000. That’s a big win for employers that are discovering that they’ve got more compliance that they need to do.
(00:35:14):
So we’re going to give you a little bit more detail as we go through what some of the common mistakes are. So for ACA, I would say one of the core violations of ACA is not offering coverage that meets the standards. So an employer has to offer coverage that minimum essential coverage standards, minimum value standards, and that is a calculation on the health plan itself. And meets affordability standards. And the really fun thing for employers that are subject to it is that those affordability standards change annually. And so you have new calculations that you have to do and figure out.
Jeff Plakans (00:36:06):
I would say Carla, with all of the clients that we work with, the affordability question is the biggest one that we run into. Because a lot of organizations are looking at health costs and what the cost throughout the calendar year, and sometimes they don’t have a plan year that is a calendar year. And there’s always a surprise after the fact going, “Wait, this wasn’t affordable.” So, one recommendation that I would say to everyone is, whoever you’re working with as a broker, make sure that’s part of the discussion that you’re having when you’re setting the contribution rates for your organization. Don’t be surprised later. As the messengers, we hate to be shocked, so to speak.
Carla Adams (00:36:56):
Yeah, absolutely. That’s for sure. Another key thing with ACA is the ACA added some additional required notices. I lost count of what it’s up to for all the different notices employers have to give. It’s a lot. But you have the Marketplace/Exchange Model Notice, you have the Grandfathered Plan Notice, which doesn’t still apply to a lot of plans because there’s not a lot of grandfathered plans left. You have the Summary of Benefits and Coverage notice and the revised COBRA notice. I want to go back to the Summary of Benefits and Coverage notice, which your carriers typically, most of the carriers are providing that for you. This particular notice often gets confused with the ERISA summary plan description, because under ERISA you have to have a written instrument, which is your plan document. You have to have a summary plan description, and you have to distribute the summary plan description to the plan participants.
(00:38:09):
And so, I’ve talked to companies all the time that are doing this Summary of Benefits and Coverage notice, they’re absolutely getting that out. And that is totally different than the summary plan description. I’ve had people’s, I’ve said, “Can I see a copy of your plan document summary plan description?” And I’ve had people send me the SBC over. I always like to clarify for people, “Those are two totally different things. The SBC is like a two or three page form, and it’s a very specific format, whereas the plan document and summary plan description can be 90, 100, 150 pages, depending on what all components are going into it.” So, it is a lengthy document that looks like a legal document, so those are two totally different things. And then we have the reporting that we talked about. And we talked about that the B reporting is done by providers of coverage, so self-funded two to 49 or an insurance carrier.
(00:39:23):
When the insurance carrier does that B reporting, that is their requirement. It has absolutely nothing to do with the employer requirement. The employer requirement is the C reporting for those that are applicable large employers. And was there something else I wanted to point out on that? No, I already pointed that out, so we’re good. All right. I don’t know if this box will move around. It’s driving me nuts. Okay, so number one, ERISA compliance failure is failure to maintain an ERISA plan document and summary plan description. And I would also say failing to do updates along the way would be included in that. It is not provided. You do get a lot of documents from carriers that are, they’re required by the state to give you, but carriers do not provide ERISA plan documents, because ERISA is an employer law.
(00:40:36):
Now, a self-funded TPA will often draft a plan document for the plan, but they’re typically only addressing that health plan. So, if you had a self-funded plan, they’re going to draft the plan document for that. But if you had fully insured dental vision life, those are not under that umbrella. They’re not covered. So, you have to make certain that you’re addressing those products that are not part of that self-funded plan. And so, that can be another area where people miss. The other thing that I will say on the ERISA plan document is this. This document is not just something that you stick in a drawer and never think about again. But it is something that sure, the Department of Labor, if they ever came in for an investigation, they would ask for a copy of it, absolutely.
(00:41:49):
But this document is actually used when there’s disputes. For instance, disputes with claims payment. A story I like to tell of one of my own personal experiences with a group that I was working with is, the employer had an employee out on approved medical leave. And there was a $40,000 healthcare claim.
(00:42:19):
And the carrier, it’s a large national carrier, denied that claim. And they indicated their reason for the denial was they believed based on the information they had gathered that this employee was probably not eligible to be on the health plan, and therefore they were denying the claim. Well, it turned out the carrier was wrong. I know we always feel like carriers are wrong from time to time. And so, the employer, this was an employer that had everything buttoned up compliance wise. They provided a copy of their ERISA plan document that had all the appropriate provisions in it related to claims payment and what happens when someone’s on leave and so on and so forth. They had their handbook that had all of their details about who is eligible for approved medical leave. They had their documentation of the leave. They provided this information in their appeal to the carrier, carrier reversed their position and paid the claim. That will just give you one example of why this is an important tool to have.
(00:43:40):
So, it’s great to have the document, but once again, if you stick it in a door and don’t do anything with it, you’re supposed to distribute that summary plan description to participants. And you do have electronic distribution options, and there are special rules associated with that. But you’re supposed to proactively distribute that to the participant. However, you may get asked by the Department of Labor, a participant, or an outside third party may have authorization to ask for that document. And you’ll typically be given 30 days within the request to distribute that document, unless there’s some undue hardship that gives you an extension. And then a penalty clock kicks in and a daily penalty for failure to distribute that document will occur.
(00:44:39):
I was sharing with Jeff the other day that I had a situation with a broker where their customer, they sent them a letter that they had received, and it was an outside party that had a authorization letter for them to request this document on their behalf. It turns out that it was a hospital, and this hospital was having patients as they come in, all the paperwork that they were having them do, this document was included in there for the patient to sign. So, the patient had completed that assignment of rights and benefits to the hospital, and the hospital was telling the employer, “You have 30 days to provide this document to me, and here is the statutory penalty that will apply if you don’t.” And of course, the employer was freaking out, “What do I do?” That sort of thing. But those kinds of things can happen. And that’s an example of an outside party requesting.
(00:45:53):
If you have material changes that you’re making to your plan when your plan’s renewing or the middle of the year, if it is a material reduction of benefits, if you’re making changes to eligibility. In any of those type of material changes you’re required to either provide a summary of material modifications, leave the plan document alone, provide summary material modifications, or you can choose to update the plan document. Those are your options.
(00:46:36):
If you’re providing SMMs for updates, you have to do a fully updated document every five years. So, these documents do not have to be done every year, but this piece is something that you do have to keep in mind. And then the 5500 requirement. So, that’s 100 or more enrolled in benefits on the first day of the plan year, that is the snapshot that we look at for a risk of 5500 filing. The filing is also a daily penalty. And I believe the annual cap is $30,000 still. But don’t quote me on that.
(00:47:34):
Okay, COBRA. COBRA has a lot of moving pieces to it, and so I definitely want to make sure we get through this quickly, as I see we’re coming up on time and we want to be able to get to some questions. First and foremost, COBRA has a general initial rights notice that has to be given. You’re giving that to qualified beneficiaries that are coming onto the plan. One question I often get, “Can we just put that on our new hire packet?” Stop and think about that. You’re going to give somebody a notice that they have a right that they don’t have. If they haven’t enrolled in the plan, they don’t have any COBRA rights. So, it is not necessarily the best situation to do that.
(00:48:23):
Number two, failure to provide required qualifying event or secondary event notices. If you are administering on your own and not having a outside administer do this for you, you’re responsible for keeping up with all of these timelines and all of these notices. So, when you have somebody who has a COBRA qualifying event, whether that’s a reduction in hour, whether it’s a termination, or the policyholder qualifying for Medicare, various qualifying events like that. You have to provide a qualifying event notice to all of the qualified beneficiaries on the plan. And they do have relaxed some of the rule on how to handle for the dependents, but you do have to provide those notices.
(00:49:23):
And then failing to offer COBRA to those that are eligible. So, those employees and their dependents that are enrolled on the plan the day before the qualifying event occur, all of those people are qualified beneficiaries, every single one of them. And then another area that employers have is failing to offer COBRA for the right benefits. So, have to offer for medical & Rx, Dental and Vision, HRA and FSA. HRA and FSA are very tricky. They have different rules for how you calculate the HRA and FSA premium, and how that offer of coverage is made on those. So, if you offer HRA and FSA and you haven’t figured out the COBRA aspects of it, that’s one that you absolutely want to get some help on.
(00:50:30):
Following the timelines. So, COBRA defines the timelines for notices, election payment, termination, maximum duration, so all of those have to be kept up with and followed. And then maintaining all of these records, it’s vitally important to maintain COBRA records, because whether it is a DOL investigation for ERISA or whether it is some other sort of situation or potential lawsuit or something, all of those records need to be retained so that you can protect yourself. And then staying within the COBRA guidelines is always safest. I usually get a handful of calls per year from kind, generous, amazing employers that want to go above and beyond for their employees. And I get it, I get it. But always your best guess is to stay within the COBRA guidelines. If you fail to do this, it could impact the claims payment. If you step outside of a law that requires benefit continuation, the carrier does not have to allow that individual to be on the plan. And the carrier can deny claims.
(00:52:04):
So, if you have a really sick individual that is on your plan that you’re trying to help, you need to keep in mind that stepping outside any of these guidelines can be problematic. If you have somebody that is out on … I’ve seen employers that went well past the 12 weeks allotted from FMLA and just keep people on health plan, that’s a bad thing to do. But the other thing is, it’s a bad thing to do to try to put somebody on COBRA that hasn’t had a qualifying event that would lead to that. But you’re trying to help them for one purpose or another. It’s just a bad idea all the way around. Just stay within the guidepost.
(00:53:01):
And FMLA. So when somebody is out on FMLA leave and they return, you have to return them to the same level of pay, same level of benefit, same level of authority, same or similar shift or hours. I’m going to move through this a little quickly. Saying the wrong thing when employee requests leave. Comments that discourage taking time off, discuss personnel needs of the department. If you’re a CPA and you want to remind them when April 15th comes around, that would be strongly encouraged. And then questions the validity of the leave request or seeing judgmental in nature. There are very specific lawsuits that people have won that are tied to every single one of those bullet points. That’s where I got them from.
(00:53:52):
Making assumptions about what qualifies for leave. FMLA absolutely defines what qualifies for leave. And so, even if you think a situation may not, you really kind of have to just run through the test and make sure. Disclosing an employee’s private medical information to unauthorized parties. One of the largest lawsuits I’ve seen was a combination HIPAA and FMLA, where somebody that was charged with keeping the protected health information private revealed in an elevator to individuals in the elevator that this individual had X, Y, Z disease. And it was a very painful lawsuit against the employer.
(00:54:35):
And the millions and two managers were sued as well. Because under FMLA, it’s not just the employer, but managers and supervisors can also be named in those suits. And so this is why training of managers and supervisors is one of the most vital things that you can do. And then taking action for an unforeseeable leave versus foreseeable. So, you can require advanced notice if it’s foreseeable. The rules are different if it’s something that’s unforeseeable. All right, so I promised a quick checklist. Do we want to go through questions? Well, I’m just going to leave this up here and let people review the checklist. And then do we have any questions in the chat?
Jeff Plakans (00:55:29):
Absolutely do have some questions. And we can get through them real quickly. I think they have relatively fast answers. Then we can get to the checklist. And if folks have to drop off, well, the checklist will be in the recording. The first one, “Is the 50 to 99 employee count for ACA the full year count for all employees, or an average of employee count per payroll period?” Good question, long answer.
Carla Adams (00:56:01):
I was going to say, I wish it were that simple. You’re looking at, of course, your full-time equivalent counts, but you have to look at each month of the 12-month year. And you have to look at what that average is out. And there are calculators out there that can help you run that to make the determine if you’re an ALE. And here’s the really sucky part about all this. It’s different for every single one of those laws that we talked about. What is apparent to me is that the federal government has changed the way that they like to count every single time they have written one of these new laws. Because it’s different on COBRA, it’s different on FMLA, it’s different on all of it. And so that’s where you need a really good advisor.
Jeff Plakans (00:56:57):
Well, specific to the ACA, it’s on full-time equivalent hours, not individuals hours. The good news for those of you who are clients of Commonwealth is there’s some great reporting in there that will give you help with that very account, and it’s just two or three clicks away. So if you have questions about that, if you’re one of our ACA clients, if you’re not, and you should be, just give your CSS a query on that, we’ll start looking at it and put it together for you. The next one, Carla, what is a material change to my plan?
Carla Adams (00:57:37):
Okay, so one type of material change would be if you are significantly reducing the benefits that were available. Whatever the plan changes that you are making is significantly reducing the benefits. If you’re changing the eligibility criteria, absolutely. That is a material change. So think about things such as deductibles and co-pays and emergency room co-pays, and if it’s a significant change, a material change. Changing to a different carrier with the same deductible plan, it’s a change and they need to be aware of the change in carrier. But that’s not necessarily going to trigger a requirement for an SMM. And keep in mind a lot of the plan documents-
Jeff Plakans (00:58:44):
Carla?
Carla Adams (00:58:44):
Yeah.
Jeff Plakans (00:58:45):
You just went to alphabet soup world. What’s an SMM? Just for everybody watching?
Carla Adams (00:58:52):
Summary of material modifications.
Jeff Plakans (00:58:54):
There you go. See, thank you. That would be for your ERISA plan document, everybody. All right, moving on. Somebody says, “I thought ERISA applied only to my 401(k) plan. If my retirement folks file it, am I okay on my health plans?”
Carla Adams (00:59:15):
Nope, you’re not. It applies to both retirement plans and health and welfare plans. Your retirement provider is, I’ve never seen a retirement provider that files for health and welfare. It’s outside of the scope of what they do. So unless they’re both a retirement provider and they also do something associated with insurance, they wouldn’t. It’s not your broker’s responsibility is a employer law. And as we’ve discussed, we’ve got the two thresholds, the hundred or enrolled more have to do the 5500. But everybody that offers benefits that are subject to ERISA that are private sector employers, everybody has to have the wrap document or the plan document.
Jeff Plakans (01:00:07):
Okay. All right, awesome. Couple more here. For COBRA, if my dependents are not enrolled in the plan, but then I go on COBRA, are they eligible later?
Carla Adams (01:00:22):
Not unless there is some sort of … No, I was trying to think if there’s a second door. No, there’s not. The rule is you have to be one, enrolled on the plan the day before the event, the day before the event. Those are the individuals who are eligible. Now, there are situations where maybe the policyholder will be coming off of COBRA. The dependents can stay on COBRA. The other scenario that you will see is that the employee policyholder, there could be scenarios where they don’t elect COBRA for themselves. Each and every one of those qualified beneficiaries have a separate COBRA, right? So you could choose just a COBRA for the kids. You could choose to cover for the spouse and the kids, or you could choose to COBRA for the whole family. It’s a separate-
Jeff Plakans (01:01:33):
Right. Okay. Awesome. Last one, well, there’s two more actually. “On the FMLA, somebody writes, “does it cover 50 or more? Because in my state it seems to be everybody.”
Carla Adams (01:01:52):
So, there are a rising number of states, I think we’re at 38 states or something like that now, that have some sort of state leave requirement. And we did not touch on that in this presentation, because all the states are so different. But there are states that have various forms of state leave requirement. They all look kind of a little different. If you are an employer that is subject to FMLA, you have to deal with both what the state is saying, and you have to deal with what FMLA is saying. So, you can’t just follow one. Because they’re going to have some different requirements. And this is one of the reasons why we always recommend going with a company that does this to help you administer it. Because it is so complicated to deal with.
Jeff Plakans (01:02:56):
Yeah, the interplay between the two can be complicated from state to state as well. All right, so the final one, which I’m going to choose to answer is, “Who’s going to do all this for me if my broker’s not?” Great question. Here’s the answer. The partnership that exists between Commonwealth Payroll and HR and the isolved Benefits team can bring all of these benefit administration solutions to your doorstep to make sure they’re done right, to make sure that T’s are crossed, that I’s are dotted, that if we need to be talking to Carla, we can be talking to Carla. And more importantly, so you can sleep at night knowing that the questions that you don’t know the answers to are some of the things that you didn’t know about until one p.m. today Eastern time now have to be dealt with. And so you can forestall any potential penalties or issues with any of these different areas of benefit administration or retirement plan administration.
(01:04:02):
So, do call us at Commonwealth, talk to your CSS, talk to your account manager if you want to know more about how to do this or you can call me directly. You can see my information is there on the screen. Carla, thank you very much for giving us your time today. We really appreciate it. I know there might be some panicking people on the call today. Don’t panic, just give us a call. Like everything, we’ll take you right through it. For all of you that joined us, again, thank you so much for taking your time today to learn more, to become a better employer, to become the employers, and thanks for sharing your lunchtime with us. Thanks, everybody.
Carla Adams (01:04:45):
Bye, everybody.
TOP