Benefits Compliance



First a bit of background - ACA History

Starting in 2011, Departments issued regulations requiring non-grandfathered gropu health plans and carriers to cover all FDA-approved contraceptive methods, sterilization procedures, and related education and counseling. As a result, many of our clients that objected to these rules on faith-based principles, elected to remain grandfathered under the ACA. If you applaud this position, give credit to a company like Hobby Lobby for taking their case to the Supreme Court where a ruling was made to allow closely held for-profit companies that had religious objections to receive a similar accommodation that was previously granted to religious non-profits.

That Was Then … This .. Just In



The Internal Revenue Service ("IRS"), has just released their annual limits for 2019.   Yes, this is the kind of thing that gets me all excited.   It must be hard for the  IRS, whose sole purpose is to collect taxes, to furnish us the new limits allowing for greater tax savings for astute health plan participants who like to save money.   This does not mean we do not believe in paying our fair share ... it only means we do not like to pay more than our fair share.

Papa Bear and the Goldilocks Health Plan

Papa Bear and the Goldilocks Health Plan

Before a knee injury, one of my annual traditions was running with my fellow Holmies in the annual Dallas Marathon corporate relay....

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Health Plan Analytics Stuck in the Wild West?

Health Plan Analytics Stuck in the Wild West?

Our family loves traveling to Colorado each summer. This year, we passed through Leadville and Minturn, two old mining towns that remind...

The post Health Plan Analytics Stuck in the Wild West? appeared first on Holmes Murphy.

No Health Insurance - IRS Shows Us How Penalty Is Calculated

w2form-picIf your like me ... you may have thought the IRS penalties imposed for not having health insurance under the new ACA federal healthcare rules simply utilized the greater of 1% or $95 calculation by applying 1% times adjusted gross income.

This week, Ed Oleksiak, JD, Holmes Murphy's national compliance lead, walked our  consulting teams through how the the IRS will apply the penalty.   So the 1% individual penalty is not just 1% times your   income.   You actually subtract a base amount which is the minimum thresholds for being required to file a tax return determined by filing status and then the 1% is multiplied times the resulting net income amount.   The starting amount is household income.   We are including a definition and example below.

Household income is the adjusted gross income from your tax return plus any excludible foreign earned income and tax-exempt interest you receive during the taxable year. Household income also includes the incomes of all of your dependents who are required to file tax returns.

Example: Single individual with $40,000 income

Jim just plain does not like politics or federal mandates.   He is an unmarried gun-toting, iPhone 5s carrying young invincible   with no dependents.   He pays service fees each month to access his   account ... but feels paying monthly health insurance premiums does not help him with the ladies.   Jim  does not have minimum essential coverage for any month during 2014 and does not qualify for an exemption. For 2014, Jim's household income is $40,000 and his filing threshold is $10,150.

To determine his payment using the income formula, subtract $10,150 (filing threshold) from $40,000 (2014 household income). The result is $29,850. One percent of $29,850 equals $298.50.

Jim's flat dollar amount is $95.

Because $298.50 is greater than $95 (and is less than the national average premium for bronze level coverage for 2014), Jim's shared responsibility payment for 2014 is $298.50, or $24.87 for each month he is uninsured (1/12 of $298.50 equals $24.87).

Jim will make his shared responsibility payment for the months he was uninsured when he files his 2014 income tax return, which is due in April 2015.

2014 Federal Tax Filing Requirement Thresholds

Filing Status


Must File a Return If Gross Income Exceeds


Under 65


65 or older


Head of Household

Under 65


65 or older


Married Filing Jointly

Under 65 (both spouses)


65 or older (one spouse)


65 or older (both spouses)


Married Filing Separately

Any age


Qualifying Widow(er) with Dependent Children

Under 65


65 or older


Health Plan Identifier (HPID) - A Must Do by November 5th, 2014

If your company sponsors a health plan (excluding small plans), and you have administrative oversight of that plan, you must get a Health Plan Identifier (HPID) under HIPAA by November 5th, 2014. You might be saying, I already have a lot on my plate or I would rather wait to do this in November.   Sure, you could wait until things get slower around the fall during open enrollment or look into this before the holidays.   Or you or a member of your HR/Benefits team could knock it out today.

Here are  the instructions  our firm put together to assist our clients.

This is being required by our federal government ... don't shoot the messenger ... we are simply trying to urge our clients  to do this now.

Consumer Reports - Health Exchange Guidance


It seems ironic that we are on the eve of the October 1st, 2013 launch of the largest public open enrollment of health insurance in U.S. history and we are one day away from a government shutdown.   While the rest of Washington D.C. tries to get its act together, we recognize that our friends in human resources may need a trusted resource to help navigate consumers through the impact of the Affordable Care Act (ACA). This year only, the health exchange marketplace open enrollment period will run from October 1, 2013, through March 31, 2014.   In subsequent years, open enrollment will run from October 15th through December 7th, for a January 1st effective date.   After this initial year only, the October 15th open enrollment schedule will match up with that of   Medicare.

The older I get the more I rely on unbiased experts who can save me time and have my best interests at heart.   This is why I am a subscriber to Consumer Reports.   In the November 2013 issue, I was pleased to find a well constructed explanation of the ACA and how it might impact three different groups: someone who gets insurance through work, who buys insurance on their own, or who is Medicare eligible.

With over twenty years of benefits consulting experience, I thought I would put the Consumer Report's online guide called  to the test.   I am  giving it an enthusiastic thumbs up and hope you share it with those who come to you for help.   It is a free resource that offers an easy to follow questionnaire that guides consumers through a personal decision making process on what to do. Consumer Reports is a national nonprofit organization with one and only one mission: to take the side of consumers wherever they may need it.   Since  the new health law is the biggest change in the American health care system in more than a generation, they created the Health Law Helper to give consumers accurate and unbiased information about the law and how it affects them.

Please pass it along to anyone who needs advice from a trusted organization with the consumer's best interest at heart.



39 Days Left - Employers Must Notify Employees of Health Insurance Exchanges


Section 1512 of the Affordable Care Act (ACA) requires companies in the U.S. with more than $500,000 in annual revenue to comply with a disclosure requirement no later than October 1, 2013.   The requirement mandates that employers provide a notice to employees of coverage options available through their state exchange. All active employees, including both full and part timers, must receive the Marketplace Notice by October 1st, regardless of their enrollment in the employer plan sponsored group health plan.   If an employee is hired after October 1st, the company has 14 days to get the notice to the employee.

If you have HR / Benefits responsibility, this an administrative task that should be outsourced to your communications advisor, benefits broker/consultant or COBRA / third-party administrator.   Additionally, most carriers have already made arrangements to distribute notices on behalf of their clients who have fully-insured contracts.

The Medicare Part D Accelerated Annual Enrollment Period


Health plan sponsors are required to supply, at least annually, a special notice to their enrollees who are also covered by Medicare. The special notice indicates whether the plan's prescription drug coverage is "creditable" - that is, at least as good as Medicare Part D, on an actuarial basis. The "Medicare Part D notice" helps enrollees who are covered by Medicare make informed and timely decisions about whether and when to enroll in Medicare Part D, and avoid a Medicare late enrollment penalty. Although a plan sponsor's obligation to supply a notice extends only to enrollees who are covered by Medicare, plans sometimes do not know which enrollees actually have Medicare coverage. As a result, plans often simply distribute the Part D notice to all participants. As a part of my firm's services, we furnish our clients with the actuarial attestation of Medicare Part D creditable coverage along with the sample notice. What should be important to plan sponsors is an impending distribution notice due this year as early as October 15th.   If you are interested in receiving our firm's analysis of the rules impacting this notice distribution deadline, a complimentary copy is being made available to members of our BenefitU group in LinkedIn.   

IRS Affordability Standard - New Health Reform Guidance

What an interesting week in the land of employee benefits.   A federal appeals court struck down the constitutionality of the healthcare reform's individual mandate virtually guaranteeing that the Supreme Court will weigh in on the disputes now surfacing between the 11th Circuit and others.   Remember hanging-chad anyone?   Once again our politics got in the way so our  national policies will be determined by the "heavies" in the highest court in the land. Now onto two federal healthcare requirements that had our employer plan sponsor clients wondering if sanity would prevail in Washington.   As a reminder, the statute requires employers with 50 full-time employees or more to offer health insurance to employees and dependents in 2014.   The law requires the coverage to be both "affordable" and "qualifying" in order to avoid penalties.

The answer to both is good news for  employer plan sponsors.   The IRS  used broad discretionary powers to define affordability if the employee is not required to pay more than 9.5% of an employee's current W-2 wages.   The more muddier definition of  household income through AGI verfication now gives way to something the employer has in their purview as a data point.  So an employee earning $40k a year would be prohibited from single contributions in excess of $316.67 a month.

Additionally, employers caught a reprieve by IRS guidance on the new "qualifying" definition, which varies from the standard imposed in the state exchanges.   The 60% standard has now been interpreted to mean the percentage of charges covered by the plan.   So for every dollar of eligible health expenses incurred under the plan, Uncle Sam wants to see the plan picking up sixty cents of the tab.   Finally, employers were given another bonus by exempting plan sponsors from the "essential benefits" definition being crafted for plans under the state exchanges.

For more information and a nice write up by our Health Reform Advisor Practice, please go here.

Welfare Calendar & Health Plan Notice Matrix

Take Advantage of our offer to furnish you a Welfare Plan Calendar and Health Plan Notice Matrix customized for your organization.

The employee benefit landscape continues to grow more administratively complex.    A recent posting on the  Independent Review Organization rules that came out of federal health reform is a prime example.   With so many dates to remember and notice obligations, we wanted to provide you with an updated edition of our Welfare Plan Calendar and Health Plan Notice Matrix.

In order to furnish you this hard copy spiral bound compliance resource, members of my team will need your ERISA plan anniversary date and contact information.

If you are interested in our offer, please go here and denote your organization's ERISA plan anniversary date in the "FEEDBACK"   section.   Your customized materials will arrive in the mail shortly thereafter.




December 31st, 2011 Deadline Approaching - HRA to HSA Conversion?


The purpose of this post is to alert you to a deadline associated with the HRA/FSA to HSA conversions required by January 1, 2012.

With higher taxes coming our way, we have to applaud any health care fund that shields an employee from paying more taxes than necessary, whether it's a Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA).   Many employers were quick to jump on the HRA bandwagon when the private letter ruling allowed for their adoption, but HSAs are emerging as the clear winner with an adoption rate double that of HRA's.   In fact, HSAs have been growing at a rate that has exceeded that of HMO's when they were first introduced.   This SHRM  article confirms that in 2011, 41% of companies adopted an HSA (compared to 20% HRA) with another 12 percent of companies expected to do so in 2012.

So if you jumped into the HRA game and are considering a move to a more tax-efficient account that will allow your employee skin in the game and greater tax savings ... you need to know that IRS will allow a rollover conversion, but the one-time rollover opportunity ends in 2011.

In working with our clients through these conversions, we have compiled the following IRS service rules that govern the rollover:

  1. Employee can transfer the balance of the HRA to an HSA.   The transfer must be made by December 31, 2011 and can only be done once;
  2. The qualified HSA distribution from the HRA cannot exceed the lesser of the balance of the HRA on September 21, 2006 or the date of the distribution;
  3. The employer must amend HRA plan document by December 31, 2011 to allow the qualified HSA distribution;
  4. There should be no prior qualified HSA distribution from the HRA on behalf of any employee with respect to that particular HRA;
  5. The employee must have HDHP coverage as of January 1, 2012;
  6. The employee must elect by December 31, 2011 to have the employer make a qualified HSA distribution from the HRA to the employee's HSA;
  7. The HRA may make no reimbursements to the employee after December 31, 2011 (i.e. the plan year-end balance is "frozen"); and
  8. The employer must make the qualified HSA transfer directly to the trustee or custodian of the employee's HSA by March 15, 2012; and either a)  after the qualified HSA distribution there is a $0 balance in the HRA, and the employee is no longer a participant in any non-HSA compatible health plan; or b)  effective on or before the date of the qualified HSA distribution, the general purpose HRA is converted into an HSA-compatible HRA for all participants.

For more information concerning one-time rollover opportunities, you may elect to read this Lockton Benefit Group Compliance Alert.

A Debit Card for Dependent Care Savings Accounts?

Most employers will use a debit card to pay a service provider under our Flexible Spending Account (FSA).   We were curious if it is common to offer debit card functionality for dependent care savings accounts as well.   So we set out on a mission to survey the marketplace.   Here are our results ... Are debit cards available for dependent care accounts?

Select vendors that administer FSAs were surveyed and it was found that many do offer debit cards with the dependent care accounts.   When the debit card it swiped, the merchant category code (mcc) is used to determine if the charge is an eligible dependent care charge.

Is it common to offer a debit card with the dependent care account?

The majority of the vendors surveyed said it is not common to offer a debit card with the dependent care account.   This is mainly because there can be swipe issues with it through the automated mcc codes that get transcribed through the system.

Following are some of the issues with a dependent care account debit card:

  • * Dependent care provider does not accept debit cards
  • * Dependent care provide doesn't have mcc code, or has an incorrect mcc code
  • * Dependent care accounts must be funded before money can be taken out of the account (This causes the most noise because the card will be denied, even if the charge is only a penny over the funds available in the account.)

In summary, there is nothing wrong with allowing the aded convenience of a swipe when using your tax-efficient savings account vehicle for health or dependent care.   A company would be wise, however, not to tout the debit card features of DCSA given the low success rate of a successful transaction.

Uncle Sam Says Audit Dependents

This post is a must read for any plan sponsor who does client work with the federal government and submits employee benefit related expenses associated with contractors on the job.   I want to thank Dependent Audit Eligbility veteran, Brennan Clipp, for sharing with me an internal memorandum obtained  from the Federal Government's Deparment of Defense ("DOD").   Even if an employer  might not contract directly with DOD, we can be certain other government agencies issuing awarding contracts on large public works projects will follow similar protocol.   In fairness to our U.S. government, they are simply saying that reimbursement for the cost of fringe benefits are allowable from contractors and dependents of those contractors, as long as the dependent adheres to the eligibility under the plan.   Further, "contractor's that fail to implement sufficient procedures to identify and exclude health benefit costs associated with ineligible dependents are in noncompliance with FAR 31.201-6 and CAS 405.   They are recommending that contractors put in audit and process procedures to protect against ineligible dependents.  

As is a common practice for plan sponsors who do a lot of design and build  work for  the Federal Government, reimbursement is often a part of contract reimbursement sought for employee benefit expenses related to contractors and their dependents covered under an employee benefit plan.   The irony here is that the left hand of government recently gave us expensive health insurance legislation and the right hand of government is warning against seeking reimbursement of those expenses for [ineligible] contractor benefits.      

The Memo we obtained here  esentially warns a plan sponsor against submitting any healthcare related expenses associated with ineligible employees or dependents who do not strictly adhere to the eligibility guidelines under the ERISA plan.   Ms. Clipp's firm warns against an employer taking on this project themselves or leaving it to a service provider that does not follow evidence based guidelines for verification.   When done correctly, ineligible dependents can average between 12-18% disenrollment.   This does not come as a surprise with unemployment hovering near 10% and escalating healthcare costs.   Finally, an ongoing audit process can ensure ineligible insured's do not creep back onto the plan when the guard goes down.    Another reason for doing a dependent audit stems from the ERISA fiduciary obligation implicit to other eligible enrollees under the plan.  

There are a number of high-quality speciality firms and important cultural and senior management issues to address internally before human resources should launch.   The notion of eligibilty management as a cost saving tool is not new, but the federal government's validation of a dependent audit as a cost savings mechanism was strong enough to provoke this notice out to field auditors of the Federal Governement.  

  If you're not sure of the Top DOD contractos ... here's the list of the top 100:

Pre-Existing Conditions on Endangered Species List

Dear Health Plan Sponsor: "My name is Pre-Existing Condition and soon I will become extinct.   We will look back in the annals of employee benefit text books and find I was used to deny coverage for those that needed it under health insurance plans."

Yes, it is true.   Our dear friend Mr. Pre-Existing Condition will soon become as extinct as the Do Do bird.   While I understand arguments against nasty insurance companies and employer-sponsored health plans denying coverage for someone who needs it, the pre-existing condition exclusion was purposefully used to help protect a risk pool from individuals jumping on and off an insurance plan in favor of using the   benefit only when the individual was sick.

Employers who self-fund their health plans have two paths they can elect to take.   The first path is to amend your health plan as the regulations require.   You must start by eliminating pre-ex for those under age 19, then open things up for those under age 26, subject to grandfather provisions.   By the first day of the 2014 plan year, you will be required to remove them entirely.   I have attached our health reform advisory practice guidance on how to repeal for enrollees under age 19 if you follow this first approach.

The second approach (which many progressive employers have already done) amends your health plan to remove pre-existing conditions entirely.   If you are in the camp that is afraid of the cost impact to your health plan, you can have your benefits consultant or health plan run the numbers to find out how many claims you are denying due to pre-existing conditions.   When you eliminate enrollees under HMO plans, those who send in HIPAA credible coverage notices without a 63 day break, consider new requirements for those un-grandfathered plans under age 26 and add back in the administration costs and goodwill lost ... my opinion is you will find the "pre-ex juice just ain't worth the squeeze."   This rationale is admittedly harder to make for a small business owner than a larger plan that can absorb a few outliers.   But if you use your health plan as a recruiting tool, it can make sense to clean out the closet and get rid of Mr. Preexisting Condition before the government puts him on the endangered species list ... right next to the DoDo bird.

Eliminate Pre-Existing Condition Exclusions on Enrollees Under Age 19 What's the Requirement?

All plans subject to the health reform requirements, including grandfathered plans, must remove preexisting condition limitations on enrollees who are under 19 years old.

What's the Deadline? First day of the first plan year that begins on or after September 23, 2010.   We believe "plan year" means the ERISA plan year, not the insurance contract year.

What's the Issue? Pre-existing condition restrictions are a dying pony.   Many plans no longer contain these restrictions.   For those that do, they must be amended to remove the restrictions as applied to individuals under age 19 and, by the first day of the 2014 plan year, remove them entirely.   Note that the obligation to remove the restriction for individuals under age 19 is not limited to dependent children; it applies to employees under age 19 as well.   Note also that exclusions that apply regardless of when the condition arose relative to the date of coverage are not pre-existing condition exclusions (for example, a plan provision excluding coverage for bariatric surgery is not a pre-existing condition exclusion, because it applies regardless of when the condition arose).

What Should You Do? Plans that currently apply a pre-existing condition exclusion to enrollees will need to be amended to remove the applicability of the restriction to enrollees under age 19. Ideally the amendment should be made prior to the beginning of the coming plan year.

Notice/Plan Amendment Obligation: Plans currently have an obligation to provide a General Notice of Pre-Existing Condition Restriction to enrollees prior to the date coverage begins. Plans should review this notice and modify it to make clear that it does not apply to enrollees under age 19. Amend the plan, ideally prior to the beginning of the coming plan year, to conform any pre-existing condition restriction to this requirement.

Health Claim Appeals - Two too Many IRO's

The law mandates that emplyees in non-grandfathered   health care plans be able to request a federal external review if a claim is being denied.   Under the interim final rules applicable to all plans with plan years on or after October 1, 2010, the group health plan must give claimants up to four months to request an external review after an adverse claim decision.   As an example, lets say a patient disagrees with a decision by the insurance company to cover an FDA approved procedure or device deemed to be experimental by one of the four national [monopolistic -sarcasm mine] health insurance companies.   This would be an adverse claim decision you may wish to appeal.   An "adverse benefit determination" is by  definition  a denial, reduction, or termination of, or a failure to provide or make payment for, a benefit. Many employers already have claim review processes in place, but utilize ONE independent review organization.   The new federal law will required to contract  with AT LEAST THREE independent reivew organization and rotate claims  assignments  among them.   The Feds must have feared market forces would have failed to keep the IROs honest if only one were required by law.   This part of the law is a big shock to employers who must now bear the cost of coordinating   this triple-contract vendor review.   While employers can follow a state's external review as an alternative to federal, we will be encouraging our clients to follow a uniform process across multiple state sites.   There are 43 IROs affiliated with URAC has accreditted and only 10 of these operate in multiple states.

Here are the timelines associated with the process:

  • Claimants have four (4) months to request an external review
  • Preliminary review must be completed within five (5) business days of request
  • External review must be copmleted within forty-five (45) business days
  • Claimant can ask for expedited review in life-threating situations
  • IRO must turn expedited reviews around within 72 hours

When seeking to contract with an independent review organization (IRO), an employer or their consultant will want to find a large panal of physicians in multiple specialties with a geographic presence that aligns where your plan participants reside.   Additionally, make sure they are a member of the National Association of Independent Review Organizations (NAIRO), as this is  the "good housekeeping seal of approval" in the IRO business.   The average cost for external review is around $600 and claims requiring.   Not adhering to these rules can subject a health plan sponsor or health insurance issuer to a $100 per day per violation excise tax imposed under the Internal Revenue Code, in addition to giving the claimant a green light to file suit.

It is true that only a fraction of the health plan claims undergo appeal, but requiring THREE IRO's is TWO TOO MANY.   Incidentally, my firm will soon be releasing guidance and recommended IRO's with model contract language as a service to our clients.

Employers Ponder Where to Put Lactation Stations

Amid a flurry of new federal legislation, employers are beginning to gain a better understanding of the new Breaktime for Nursing Mothers law (Section 4207 of PPACA).   Employers with 50 or greater employees must provide a reasonable break time for expectant mothers to express milk at the workplace.   Many sources say a reasonable break time can be estimated at 30 minutes for every 4 hours. Employers who are under 50 employees who can show signs  of hardship through "difficulty of expense" in complying will be exempt.   Our employee benefits counsel has confirmed that it is not based on the number of employees at a given location, but rather the total number of employees that work for the company as a whole, subject to Fair Labor Standard Act (FLSA) definitions.   Employers will not be required to treat the break as compensable time.   While this law is already the standard for many larger employer worksites, many  small to mid-size employers cramped for space are scratching their heads.   Furthermore, it is logical to  question a burden of compliance  for certain industries (oil & gas rig, coal mines, etc...)     The new guidance confirms the station cannot be a bathroom and that it must be free from intrusion and shielded from view.

While the effective date is coincident with the day President Obama signed PPACA into law, the rules for enforcement have not yet been released.   We anticipate Department of Labor (DOL) to provide the penalties for non compliance and give employers a time frame to  comply.   For more guidance on employer best practices, you can visit the United States Breastfeeding Committee available links.