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is brought to you by United Benefit Advisors
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LazzarottiJ@jacksonlewis.com
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Represents management exclusively in every aspect of
employment, benefits, labor, and immigration law and
related litigation.
750 attorneys in 55 locations nationwide.
Current caseload of over 6,500 litigations and
approximately 415 class actions.
Founding member of L&E Global.
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This presentation provides general information regarding its subject and explicitly may not be
construed as providing any individualized advice concerning particular circumstances. Persons
needing advice concerning particular circumstances must consult counsel concerning those
circumstances. Indeed, health care reform law is highly complicated and it supplements and
amends an existing expansive and interconnected body of statutory and case law and
regulations (e.g., ERISA, IRC, PHS, COBRA, HIPAA, ADA, GINA, etc.).
The solutions to any given business’s health care reform compliance and design issues
depend on too many varied factors to list, including but not limited to, the size of the employer
(which depends on complex business ownership and employee counting rules), whether the
employer has a fully-insured or self-funded group health plan, whether its employees work full
time or part time, the importance of group health coverage to the employer’s recruitment and
retention goals, whether the employer has a collectively-bargained workforce, whether the
employer has leased employees, the cost of the current group health coverage and extent to
which employees must pay that cost, where the employer/employees are located, whether the
employer is a religious organization, what the current plan covers and whether that coverage
meets minimum requirements, and many other factors.
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What are “voluntary benefits”?
Why offer them?
They are voluntary, so no issues, right?
o Can these benefits really be subject to ERISA?
o What about COBRA, HIPAA, FMLA, etc.?
o Are there tax implications?
o Do I have to think about the ACA?
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Typically take the form of “individual” policies
Designed to “beef-up” core benefit program(s)
Generally provide focused coverage
“Limited” employer involvement
Employees usually pay 100% of the cost of the coverage
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Examples of possible voluntary benefits
o Medical Benefits
• Dental, Vision
• Critical Illness Insurance
• Hospital Confinement, Fixed Indemnity
o Individual Disability Insurance
o Long-Term Care Insurance
o Auto and Home Insurance
o Pre-Paid Legal Coverage
o Identity Theft Insurance
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They can offer:
o Greater choice with less cost
o Reduced administrative burden
o Enhance overall benefit structure
But some with some practical considerations
o Avoid overwhelming employees
o Increased negotiating leverage
o Implementation needs
o Responding to questions/complaints by employees about carriers,
benefits, claims, etc.
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Not really…
o These benefits could be “employee welfare benefit plans” under
ERISA
o Voluntary programs providing health benefits also could be
“group health plans,” and subject to the Affordable Care Act
o There also are potential COBRA, HIPAA, FMLA, tax and other
issues to consider.
Practical Tip – A employee welfare benefit plan
providing medical benefits could be subject to ERISA,
but not also subject key provisions of the ACA.
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What is an “employee welfare benefit plan” under ERISA?
o a plan, fund or program
o established or maintained by an employer or by an employee organization,
or by both
o for the purpose of providing medical, surgical, hospital care, sickness,
accident, disability, death, unemployment or vacation benefits,
apprenticeship or other training programs, day care centers, scholarship
funds, prepaid legal services or severance benefits
• Note what is not listed – e.g., identity theft, homeowners
insurance, automobile insurance, pet insurance – not ERISA
benefits.
o for participants or their beneficiaries
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What is a “plan, fund or program”:
o Based on analysis of the surrounding facts and circumstances
o Must be an “ongoing” administrative programs
o That enables reasonable persons to ascertain
• intended benefits
• class of beneficiaries
• source of financing
• procedures for receiving benefits
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Types of welfare benefit plans
o Health insurance – medical, dental, vision, HFSA, on-site clinic/health
provider
o Group life insurance
o Long-term disability income
o Business travel insurance
o Pre-paid legal services
o Short-term disability income only if provided through insurance or a trust
fund, and in excess of state mandated disability benefits (CA, HI, NJ,
NY, PR, RI)
o Severance pay
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Exclusions from ERISA welfare benefit plans
o Payroll practices to the extent paid from general assets – short term disability
o On-premises facilities (to the extent of treatment of minor injuries or illness or
rendering first aid in case of accidents)
o Holiday gifts
o Sales to employees
o Hiring halls
o Remembrance funds
o Strike funds
o Certain group or group-type insurance programs
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DOL Safe Harbor - certain insurance programs exempt from ERISA
where all of the following are met:
o no contributions are made by an employer or employee organization
o participation in the program is completely voluntary for employees
o the sole functions of the employer or employee organization with respect to
the program are, without endorsing the program, to permit the insurer to
publicize the program to employees or members, to collect premiums
through payroll deductions or dues checkoffs, and to remit them to the
insurer
o the employer or employee organization receives no consideration in the
form of cash or otherwise in connection with the program, other than
reasonable compensation, excluding any profit, for administrative services
actually rendered
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DOL Safe Harbor: no contributions are made by an employer
or employee organization
o Employer paying premiums directly to carrier.
o Employer reimburses employees for premiums paid by employee
o Pre-tax contributions under Section 125 Plan?
• Salary reductions treated as employer contributions. Prop. Treas. Reg.
1.125-1(r)(2).
• Employee choice of cash or after-tax contributions toward health
coverage is NOT employer payment plan. Notice 2013-54
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DOL Safe Harbor: permissible employer functions, but no
endorsement.
o to permit the insurer to publicize the program to employees…, to collect
premiums through payroll deductions or dues checkoffs, and to remit them
to the insurer
o Some related functions also may be permissible as within the normal course
of the above enumerated functions:
• Setting when policy becomes effective
• Tracking which employees are eligible, and sharing with carrier
• Coordinate changes in coverage with carrier
o Endorsement is very fact specific
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DOL Safe Harbor: Endorsement risks
o Carrier selection
o Plan design
o Coordinating with existing ERISA benefit plan(s)
o Acting like ERISA applies
o Involvement in plan administration, claims, etc.
o Combination of factors
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DOL Safe Harbor: Endorsement factors
o Did employer play active role in determining who is eligible for
benefits or other plan terms?
o Is employer named as plan administrator?
o Has employer provided plan description that refers to ERISA or
is covered by ERISA?
o Has employer provided materials suggesting it endorses
program?
o Does employer participate in claims processing?
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Examples indicating employer “endorsement”:
o ER urges EE participation or engages in activities that would lead an EE
reasonably to conclude program is part of ER’s benefit program
o ER is designated as plan administrator for purposes that are more than
merely ministerial or ancillary to other activities within the safe harbor
o ER is substantially involved in the creation or administration of the plan determining employee eligibility, selecting carrier, or negotiating terms of
policy or benefits
o ER distributed a booklet, embossed with its logo, to all employees,
encouraging them to give the policy “careful consideration” as a “valuable
supplement to [their] existing coverage,”
o ER referred to the plan as “our plan,” and employed a full-time benefits
administrator, who accepted claims forms and submitted them to the insurer
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Examples indicating no employer “endorsement”:
o ER files an IRS Form 5500, without more
o EE dealt solely and directly with the carrier, paid 100% of the
cost of the policy with after-tax dollars, and the ER made clear
that participation was completely voluntary
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DOL Safe Harbor: no consideration to employer – cash or
otherwise – in connection with the program, other than reasonable
compensation for administrative services actually rendered
o No clear standard for what is permissible, reasonable
o Tax advantages from payroll deductions themselves will not
cause the employer to fail to meet this factor, but see pre-tax
contribution issues under 2013-54.
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Failing to meet DOL Safe Harbor means plan is subject to ERISA.
FALSE
o The plan may not provide a benefit covered by ERISA – home,
auto, identity theft, pet insurance
o The organization may not be an organization subject to ERISA –
church, government, etc.
o Plan may not be “maintained” by employer.
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What does ERISA coverage mean for us?
o Depends on factors such as: type of plan, type of employer,
number of employee
o ERISA fiduciary duty requirements
o ERISA enforcement provisions
o ERISA reporting and disclosure requirements
o See our “ERISA: Basics and in Context” program June 2014
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Reporting and Disclosure
o Summary plan description
• DOL specific content and furnishing requirements
• Wraparound document
• Practical Tip: Wrap is excellent compliance aid for voluntary plans
o Annual reporting requirement
• Small employer exception
• Schedule A from carriers
• DOL Delinquent filer voluntary compliance (DFVC) program
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ERISA welfare plan that also is group health plan
o COBRA
o FMLA
o USERRA
o HIPAA – privacy/security and portability
o ADA
o GINA
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In general, ACA (including the PHSA mandates) apply to
group health plans.
Many ACA (and PHSA) provisions do not apply to
“excepted benefits” under HIPAA.
o Non-health benefits, limited scope benefits, non-coordinated
benefits and supplemental benefits.
o Excepted benefits do not constitute minimum essential coverage
(MEC)
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What are excepted benefits?
o Non-health benefits. Benefits that do not provide health coverage,
such as liability insurance, automobile insurance, workers
compensation and accidental death and dismemberment coverage.
o Limited-scope benefits. Limited excepted benefits, such as
limited-scope vision or dental benefits, long-term care, nursing
home care, home health care or community-based care, as well as
health FSAs that meet certain requirements. To fall into this
category, the benefits must either
• be provided under separate policy, certificate contract of insurance or
• not be an integral part of a group health plan.
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What are excepted benefits?
o Non-coordinated benefits. Coverage for a specified disease or
illness (e.g. cancer-only policies) and hospital indemnity or other
fixed indemnity insurance. These benefits must meet the following
requirements
• Provided under a separate policy, certificate, or contract of insurance;
• No coordination between the provision of such benefits and any
exclusion of benefits under any group health plan maintained by the
same plan sponsor; and
• Benefits paid with respect to an event are made without regard to
whether benefits are provided under any group health plan maintained
by the same plan sponsor.
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What are excepted benefits?
o Supplemental benefits. Supplemental excepted benefits, which is
coverage supplemental to Medicare, CHAMPVA or Tricare or to coverage
provided under a group health plan, that is provided under a separate
policy, certificate or contract of insurance.
o Safe Harbor rules
• Must be insurance policy, issued by entitled that is not offering the primary
coverage
• Fill gaps in existing coverage – payments of coinsurance deductibles
• Cost must not be more than 15% of the primary coverage using COBRA
• Not health factor discrimination.
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W-2 Reporting
o Dental and vision – optional
o Hospital indemnity or specified illness, paid on after-tax basis – do not
report
o Hospital indemnity or specified illness, paid through salary reduction (pretax) or by employer – report
o Other typical voluntary benefits disability, LTC, auto/home, workers
compensation, supplemental liability, pre-paid legal – do not report
Section 6055/6056 Reporting
o No reporting required for excepted benefits
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PCORI and Transitional Reinsurance Fees
o Insurance policies and self-insured plans that provide only
excepted benefits are not subject to PCORI or the Transitional
Reinsurance Fee, including limited-scope dental and vision
plans.
Summary of Benefits and Coverage
o Proposed SBC regulations issued in December 2014 confirm
SBCs are not required for excepted benefits.
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Voluntary benefits can be excellent addition to overall
benefit program.
Is it better to just tackle ERISA compliance?
If not, be careful with “endorsement.”
Tax-treatment of employee salary reduction contributions
through salary reduction can have significant impact.
Watch ACA implications for non-excepted health
benefits!
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