Fall is here, kids are back at school, leaves are turning red and orange, college football is underway; however, for the HR professional, the arrival of Fall means the start of open enrollment for benefit plans. Below is money- and time-saving regulatory guidance to consider before, during, and after your open enrollment period for your employee benefit plans.
To prepare for the open enrollment period, sit down and develop a plan. The plan should include the dates for the enrollment period, what resources are at your disposal and how to allocate them. Work with your service providers to see what types of resources they have to assist you. Develop a checklist that contains all of the tasks relating to open enrollment and the due dates for such tasks. Take into consideration how long it will take to train any staff members that may have to answer benefits-related questions from employees.
Communication is always an important part of HR’s job and is even more important during open enrollment. Consider having open enrollment meetings to communicate all the healthcare reform changes to employees. Try to notify employees of open enrollment meetings 3-4 weeks prior to the date of the meetings. Schedule the meetings so that the you have time to submit enrollment changes to insurance providers and verify that employees are appropriately enrolled in their chosen benefits. You may want to have benefit providers present for individual employee meetings. In addition, provide enrollment kits to employees that provide comprehensive information about the benefits and their portion of the cost. Be sure to provide employees with an adequate time frame that they can review all of the materials and consult with family members in order to make decisions regarding their benefits.
Watch Disclosure Obligations
When developing the open enrollment materials, it may seem like the materials comply with disclosure laws. Not true. However, simply placing the disclosure into the open enrollment materials does not guarantee compliance. When it comes to plan-related disclosures, it is important for you to ensure that the form, content, timing, and delivery requirements are met.
For example, it is common to find open enrollment materials that contain abbreviated HIPAA privacy notices or COBRA notices that fail to meet the content requirements. The same types of violations can result from failure to provide required disclosures to COBRA participants or employees on leave of absence. You should mail materials to the last known address and properly address the spouse and dependents in order to minimize the potential for violations. Disclosure failures can cost you not only substantial amounts of money in the form of excise taxes and penalties, but can also lead to claims from individuals harmed by any alleged lack of disclosure.
Summary Plan Descriptions
If you are providing health and welfare benefits, you are subject to the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”) and are considered to be offering an ERISA plan. Under ERISA, participants are entitled to a summary of the ERISA plan (known as a summary plan description, or "SPD"). For many employers, the health or welfare ERISA "plan" is actually no more than a collection of insurance policies, and the summary of that plan consists of a collection of insurance booklets and enrollment materials. Under ERISA, the SPD format requirements are very specific and must accurately reflect the plan's contents. In most cases, the plan’s enrollment materials coupled with the insurance contracts will not meet these requirements.
If you want to continue to use insurance booklets and open enrollment materials as an SPD, you must have a "wrap" document that clearly identifies the materials (typically listed) to be included in the wrap plan. Update these wrap documents and the attachments regularly.
Note that, if there are significant changes to the benefits, the participants have a right to receive a summary of those changes within 210 days after the end of the plan year. This summary is known as a summary of material modifications (“SMM”). If those changes involve a material reduction in covered services or health benefits, the summary must be provided to participants within 60 days of the change. Therefore, in designing open enrollment materials, you must consider if the materials being used comply with the ERISA requirements and must ensure that the materials meet form, distribution and content requirements.
Cafeteria Plan Elections
Your cafeteria plan will dictate open enrollment dates. This is because employees must make cafeteria plan elections before the beginning of the plan year, with any changes in the ensuing year if there is a "qualifying change in status." You need to be aware of changes in the cafeteria plan rules and be able to communicate the changes to your employees.
Because the guidance allowing correction for mistakes is informal and requires clear and convincing proof, you should take care to avoid mistakes. The most frequent cafeteria plan problems that occur are below:
- Failure to implement the employee’s changes in elections;
- Failure to allow change in status elections after the close of open enrollment; and
- The employee’s mistaken elections. Mistaken elections often occur due to the employee’s lack of understanding of the benefits being offered. You can minimize the likelihood of this type of mistake using thorough communication.
Over Simplification (Electronic Enrollment Issues)
Many employers find the idea of electronic enrollment appealing, as they view it as less paperwork, faster processing, and fewer errors. However, it is important to remember that providing benefit information electronically is subject to significant regulations. In 2002, the DOL issued a regulatory guideline that expanded electronic delivery methods and the parties who could receive the required information electronically. The guideline accepts electronic delivery methods such as e-mail, e-mail attachments, and postings on the company Web site, provided that certain requirements are met. In addition, the guideline permits electronic disclosure to employees both inside and outside the workplace, as well as non-employees. However, the guidelines requires more rigor needed for non-employees and employees lacking computer access.
Post Open Enrollment
Finally, many mistakes occur during the post-enrollment period. Work with your service providers to audit the enrollment process to ensure that the employees’ elections have been implemented. Work with your payroll department to ensure the proper amounts are being withheld from the employees’ paychecks. Be sure that the amount being withheld matches the benefits and coverage that the individual has elected.