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| Posted on: Tuesday, January 13, 2009 |
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Around the first of each year, a slew of Top 10 Lists are released on everything from the top business blunders of the year to the top pop star princesses. To not be outdone, we’d like to offer the following list of Top 10 Benefit Plan Administration Mistakes That Must be Avoided based upon errors we see frequently that have financial and legal consequences for employers.
Benefit Plans are governed by a complex set of rules and regulations which employers make their best effort to follow. If you find that your organization is making one of the following mistakes, please contact Denman and we’ll be happy to assist you in revising your practices to bring you into compliance.
Top 10 Benefit Plan Administration Mistakes That Must Be Avoided
Number 10: Violating the IRS Flexible Spending Account (FSA) risk rules – If an employee has a negative Healthcare FSA balance when his/her employment terminates, the employer can not recover that loss from the employee.
Number 9: Not offering continuation coverage (COBRA) to Healthcare FSA participants who have a positive balance when their employment terminates.
Number 8: Failure to distribute required notices to Plan participants – Plan Administrators are faced with many notice requirements each with different distribution method and timeframe requirements. The most common oversights include: Initial COBRA Notice not mailed to employees’ home, Medicare Part D notice not distributed prior to November 15th each year, HIPAA Privacy Notice of Availability not distributed every three years, etc. The Department of Labor provides assistance via their List of Required Notices and their Self-Compliance Tool. Feel free to contact Denman for assistance.
Number 7: Mis-handling of Protected Health Information (PHI) - PHI includes any individually identifiable health information such as claim resolution details, Medical Plan EOBs, correspondence from doctors, etc. HIPAA mandates proper protection, storage, and transmission of PHI. One of the most common mistakes is not using secure email when transmitting PHI.
Number 6: Not reporting life insurance Imputed Income – The IRS requires Imputed Income be added to each person’s W-2 annually for employer-paid life insurance amounts over $50,000.
Number 5: Offering Benefits in employment severance agreements that are not covered by your Benefit Plans – Benefit Plans are contracts with strict rules. Examine them closely and ask they be amended in advance to avoid overpromising which could result in employers “self-insuring” severance commitments.
Number 4: Failure to distribute Plan Documents/SPDs/Certificates of Coverage to employees – the Department of Labor requires Benefit Plan documentation be distributed to Plan participants within certain timeframes. Failure to do so carries financial penalties and can leave an employer open to lawsuits by employees.
Number 3: Not referencing and quoting from Benefit Plans and Policies when answering employee questions – Misunderstandings can lead to employees being misinformed on details such as what items are and are not covered, who is eligible, when coverage starts and stops, timeframes for adding/dropping dependent coverage, pre-existing condition limitations, etc.
Number 2: Not forwarding employee 401(k) and similar retirement Plan deferrals to the Trust in a timely manner. While the rules are complex, deferrals should be forwarded to the Trust as soon as payroll is processed.
AND, the Number 1 Mistake You Must Avoid is: Failure to properly administer Continuation Coverage (COBRA, State Continuation, Public Health Services Act, etc.) – Monetary penalties exist for violating notification timeframes and insurers/reinsurers are not contractually obligated to cover Continuation participants who were not offered and/or enrolled in a timely manner or whose premiums were late.
Should you have any additional employee benefit questions or would like to discuss this material in detail, please don’t hesitate to call the Denman Team. |
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