UBP blog


One very costly ERISA mistake most 100+ employee companies are making

Most U.S. employers with 100 or more workers don’t comply with ERISA regulations, which can result in some very steep federal fines that add up fast.

The Employee Retirement Income Security Act (ERISA) has strict requirements for employers that sponsor 401(k), group life, medical, dental and disability plans to report certain financial information on these plans to the Department of Labor (DOL) using Form 5500.

However, public records reveal that of the approximately 110,000 businesses that employ 100+ individuals, roughly 60,000 (or 55%) have not filed Form 5500.  These findings are according to a study done by Atlanta-based ERISA Pros.

What this means for employers:

If your company is one of the many that fails to file Form 5500 on time, the DOL can fine you up to $1,100 for every day that it’s late. This $1,100 applies separately for each of your benefit plans, is not subject to the statute of limitations and is not tax deductible. In other words, you could end up owing a lot of money.

For instance, an employer that sponsors a 401(k), medical plan, dental plan, group life and disability plan could owe the DOL over $100,000 for filing Form 5500 just 30 days late.

Also, beginning in 2010, employers are required to file all Plan Year 2009 and subsequent Form 5500s electronically using the Department of Labor’s EFAST2 system. This will make it a lot easier for the DOL to ensure compliance and enforce penalties.

Summary Plan Descriptions:

Last but not least, as many employers know, ERISA requires all employers sponsoring any of the benefit plans mentioned above to disclose benefit-related information to Plan participants via Summary Plan Descriptions.  Many ERISA specialists believe that the rate of employer compliance for this requirement is even lower than that of filing Form 5500.

The Department of Labor is slated to hire 1,000 new employees for 2010, 678 of whom will be investigators. So employers, start taking all the necessary steps for ERISA compliance now before the DOL comes knocking at your door.


“Important Tax Document Enclosed”, now what?: FAQs on the 1099-HC and how to use it

Massachusetts requires all residents to have Minimum Credible health insurance Coverage or face a tax penalty. That’s why every year all employees covered on your health plan in the past year receive a 1099-HC.

Employees will get their 1099-HC forms in the mail this month and will use them to report their health insurance coverage on the Schedule HC form.

Since many Massachusetts employers will be entertaining employees’ questions on what to do with this “Important Tax Document Enclosed”, we’ve put together a few 1099-HC FAQs to help them out.

What is the 1099-HC form?

The 1099-HC is a required document for adult Massachusetts residents. It serves as proof that they had Minimum Credible Coverage* health insurance in the past year. 

*Effective January 1, 2009, all health plans sold in Massachusetts are required to meet the Minimum Credible Coverage standards set forth by the Commonwealth Connector.

Who will receive the 1099-HC?

All Massachusetts adult health insurance plan subscribers who had Minimum Credible Coverage in 2009 will receive the 1099-HC.  Medicare recipients automatically meet the requirements for qualifying health insurance and will not receive the 1099-HC.

Why will I receive the 1099-HC?

Using a Schedule HC form, Massachusetts residents are required to report on their health care coverage when filing their 2009 income tax returns. The 1099-HC contains all the information adult Massachusetts residents need to complete the Schedule HC.

When will I receive my 1099-HC and how will I know I’ve received it?

Health plan subscribers’ 1099-HC forms will be postmarked by January 31, 2010. The form will come directly from your health insurance carrier and the envelope will have the words “Important Tax Document Enclosed” written on the front.

What information will be printed on the 1099-HC for the 2009 tax year?

Your 1099-HC form will contain the following information:

  • Name of your Health Insurance Company
  • Federal Tax ID for your Health Insurance Company
  • Subscriber Name
  • Subscriber Date of Birth
  • Subscriber Member ID
  • Subscriber’s Address
  • Full-year coverage or monthly coverage designation *
  • Dependent (s) Name (s)  
  • Dependent (s) Date (s) of Birth
  • Dependent (s) Member ID (s)
  • Full-year coverage or monthly coverage designation for each listed subscriber and dependent*

*If you and your dependent(s) had Minimum Credible Coverage for the full year of 2009 the “Full Year Minimum Credible Coverage” box will be checked on the 1099-HC for you as well as all of your dependents. Otherwise, a check mark will appear next to each month that you or any of your dependents had Minimum Credible Coverage for 15 days or more.

What must I do with my 1099-HC?

If you are filing a hard copy (paper) return, your 1099-HC should be included in your tax return mailing. You should also keep a copy of it for your records.

If a tax advisor is preparing your 2009 income tax return, he or she should be provided the 1099-HC form along with your other records.

When and where can I get a copy of my Schedule HC tax form? Also, how do I complete the Schedule HC?

All Massachusetts residents should receive a Schedule HC as part of the resident tax package mailed to them. If any of your employees need an additional copy, they can visit the Massachusetts Department of Revenue’s website (http://www.state.ma.us/dor) where they’ll also find instructions on how to complete the form.


Starting January 1, there’s a new penalty for failing to report payments to Medicare beneficiaries

Starting January 1, 2010, any Responsible Reporting Entity (RRE) that fails to comply with a new requirement for reporting Medicare payments to Medicare-eligible individuals for resolution of medical expense claims could face a steep penalty–$1,000 per-day the expenses go unreported.

Background on Medicare and reporting requirements:

As many of us know, Medicare is a government-funded health insurance program for individuals ages 65 and up but is not intended to be their primary health insurance (i.e. Medicare should be a “secondary payer”).  In December of 2007, then President Bush signed into law the “Medicare, Medicaid and SCHIP Extension Act of 2007” (MMSEA) to determine when Medicare beneficiaries had received reimbursements for medical expenses which Medicare could recoup.

The act requires an RRE to register with the Centers for Medicare and Medicaid Services (CMS) Coordination of Benefits Contractor (COBC) and electronically file the following information on third-party claims involving payments to Medicare-eligible claimants:

  • Identifying information about the individual (i.e. Social Security Number)
  • The amount paid to the individual to resolve all or part of the claim

The RRE’s payment is called the Total Payment Obligation to Claimant (TPOC).

Why employers need to know about this:

On or after January 1, any employer that is self-insured for all or part of any claim for medical expenses becomes an RRE and is subject to the new reporting requirements. This includes personal injury claims and can include claims for discrimination or harassment.

Employers, if the above applies to you and you employ any Medicare-eligible individuals, take the following 4 steps to help you ensure your compliance and avoid costly fines.

  1. Consult with your insurance carriers and attorneys that handle your insured liability claims. The purpose of this is to make sure everything is in place for you to report all necessary information for TPOC claims made on or after 1/1/2010.
  2. Examine your claims history to see if any demands could be made against your company for personal injury. If there have been, you should register with COBC and begin the process of filing claims information. If there have not been any such claims, you should still keep a watchful eye out for any that come in the future.
  3. If there are any claims pending against you for which you may be required to make a payment, you’ll need to determine whether or not the individual making the claim is a Medicare beneficiary.
  4. Whenever you make a payment to a Medicare-eligible individual settling a claim for personal injury or medical expenses, you’ll need to report all necessary information to COBC promptly.


The top 4 policies employers should update for the New Year

Nearly all of us like to kick of the new year with a resolution; get in shape, eat healthier, break a bad habit, manage your money better, the list goes on. The new year gives us all a clean slate and our resolutions motivate us to start the year off right.

For HR professionals, one of the many ways to start the year off right is to make sure all policies in your employee handbooks are up-to-date and compliant with the latest regulations. This will help you strengthen your case in the event that an employee (or former employee) sues you for any type of bias.

When updating your handbook for the new year, employers and HR professionals should look at the following 4 policies first:

  1. FMLA: The U.S. Department of Labor (DOL) has revised FMLA Regulations several times this past year and requires employers to provide employees a notice of their updated FMLA rights in their handbook (or a handout for new hires). If employers fail to do this and an employee files an FMLA suit, failure to notify is the first area lawyers will attack.
  2. Genetic Discrimination: The Genetic Information Nondiscrimination Act (GINA) went into effect late this year prohibiting employers from using genetic information in any employment-related decisions.  This means that employers will need to update their handbooks so that genetic information is listed as one of the “protected traits” with EEO status.
  3. Privacy and electronic devices: Many employees may have privacy expectations in their use of company computers. However, courts generally rule that employers can monitor computer and electronic device usage—since these devices are, in fact, company property. Employers may also limit or prohibit certain activities such as sending inappropriate emails or accessing “adult” materials.  The handbook is often a very effective way for employers to notify employees of their monitoring practices and prohibited activities.
  4. Social networking: New media such as Facebook, Twitter and blogs have become a part of so many of our lives –both personal and professional. Social networking websites are a great way for companies to get their names out there and solidify their brands in the minds of consumers. However, if any employee makes disparaging remarks about his or her employer on Facebook or blogs about trade secrets, new media can become your company’s worst nightmare.

To combat this, many employers have put social media policies in place. If you have one of these policies, the time is now to make sure it’s in your handbook and up to date.


IRS dollar limits for 2010, what changes and what remains the same

The new year is fast approaching and it will bring on many new changes for employers and employees both. However, the following are two things you can count on to stay the same.

  1. Maximum contribution levels for 401(k) and other defined contribution plans: Due to the falling cost-of-living index, maximum retirement plan contribution rates will be the same in 2010 as they were in 2009. This means that plan participants will be able to contribute up to $16,500 to the plans in 2010. Also, the dollar limitation for catch-up contributions to an employer defined contribution plan for individuals ages 50 and older will stay the same at $5,500. 
  2. Annual dollar limits to employer-provided transportation plans: As was the case in 2010, the IRS has set $120 per-month as the maximum value of excludable benefits under a qualified commuter benefits plan and $230 as the monthly limit for qualified parking benefits.

These two mentioned above, and virtually all of the IRS’ other annually indexed limits, will remain unchanged for 2010 with a few exceptions.

  • The 2010 out-of-pocket maximum limit for HSA (Heath Savings Account) qualifying high deductible health plans will be $5,950 for individuals (up $150 from 2009 limits) and $11,900 for families (up $300 from 2009 limits)
  • The 2010 maximum excludable amount on an employer-provided adoption assistance program will go up slightly as well to $12,170 (up $20 from last year).

We all know that as employers, you have a lot of minimums, maximums and rules to keep track of to make sure all the benefits you offer comply with all state and Federal regulations. You can count on us to keep you posted if anything changes for the upcoming year.

Share this with your employees:

Employers, feel free to copy and customize this blog for distribution to your employees. You may want to add additional financial information that’s specific to your company, such as the amount or timing of your retirement plan contributions.

Employees will find this useful at the beginning of the year as they review their past finances for tax purposes, plan for the upcoming year and set New Year’s resolutions about money.


H1N1 and FLSA, are your sick leave policies compliant?

Filed under: HR compliance,sick leave policy — ubpblogger @ 12:50 pm
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When struck with a pandemic flu outbreak, many companies will do one of the following:

  • Continue working short staffed while employees are out with the flu
  • Close their businesses for a day, or two, or several
  • Send everyone home to “telework” in an effort to stop the flu from spreading

For employers, getting hit with a pandemic flu is one thing but getting slapped with a labor law violation on top of it for noncompliant sick leave policies can make things go from bad to worse.

To ensure that your company stays compliant with the Fair Labor Standards Act while still doing as much as you can to maintain “business as usual” during a flu pandemic, employers should consider the following:

  1. Employees can do work outside of their job descriptions: When employees are out sick, employers may require healthy employees who are at work to pick up some of their ill colleagues responsibilities (even if they fall outside of the employees’ job descriptions). Just as long as the employees in question are 18 years of age or older, the FLSA places no limitations on the type of work they may be required to perform.
  2. Employees must be paid the same hourly rate, regardless of whether they work on site or from home: To control the spread of a pandemic infection, employers may require employees to work from home. If your company decides to make these requirements, you, the employer must pay all hourly workers the same rate for all hours they worked from home as you would if they had worked these hours on-site.  Also, all salaried employees must be paid their full salary for any week in which they performed any work (subject to certain exceptions).
  3. Employees who are required to work from home but cannot do not need to be paid: In the event that you shut down your workplace, thus requiring all employees to telecommute, you are only required to pay employees who are able to perform their job duties from home. The FLSA only requires employers to pay employees for hours they actually worked (whether at home or on site). That said, you should ask yourself if this will have an adverse impact on certain groups of employees. For example, if working at home requires a computer and internet access, is one group of employees much more likely to have these and thus be able to work at home? What can you as the employer do to help give equal access to the opportunity to work at home?
  4. Letting employees “volunteer” during a personnel shortage can cause you a lot of trouble: This is because the FLSA has very strict requirements governing when you can and cannot allow nonexempt employees to volunteer time. Generally, all nonexempt hourly employees working for private sector, for profit companies, must be paid at least a minimum wage for all hours they work.


4 major HITECH Act changes to HIPAA and 4 steps you’ll need to take to comply with them

Filed under: HR compliance — ubpblogger @ 4:12 pm
Tags: ,

As part of the ARRA Act passed earlier this year, several legislative changes were made to HIPAA. These changes were documented in the Health Information Technology for Economic and Clinical Health (HITECH) Act.

Among other things, the HITECH Act:

  • Added breach notification rules to HIPAA
  • Extended the privacy responsibilities of covered entities to their business associates—This means that business associates of HIPAA covered entities are not only governed by the contracts that they have with covered entities, they are also now subject to the same civil and criminal penalties for HIPAA violations. In addition, they will now have to answer directly to the HHS on all HIPAA matters.
  • Increased the monetary penalties for noncompliance—Under the HITECH Act, civil penalties can go as steep as $1.5 million for all identical violations that occur in a given calendar year.
  • Enhanced enforcement capabilities (at both the state and federal level)—The HITECH Act requires formal investigations of potential breaches by the secretary of HHS in certain cases. Also, if he or she feels that the interests of a state’s residents have been threatened or affected by a HIPAA violation, a State Attorney General can bring civil action to a federal court.

As you can see, HIPAA regulations now pack more of a punch than they did before the HITECH Act. Effective February 22, 2010, when the government begins to enforce the HITECH Act, more people will be affected by its requirements and will have a lot more to lose if they are noncompliant.

Here are 4 steps you should take to comply with these much tougher HIPAA regulations:

  1. Conduct a complete risk assessment—Your assessment should first and foremost identify all personal health information (PHI) records (both manual and electronic) that you work with in your company. It should also help you determine the risks to PHI security that exist in your company and spell out all the controls you have in place for safeguarding PHI.
  2. Create a plan to mitigate your major risks—Once you’ve done your risk assessment and identified your top risks, you’ll need to then create a written plan with the appropriate controls to address these risks. You’ll also need to implement the controls from your plan into your organization’s business practices.
  3. Make sure all business associate contracts are modified by February 17, 2010—All of the added HIPAA privacy requirements applicable to covered entities will also be applicable to business associates.  As a result, all covered entities must incorporate these new requirements into their contracts with business associates by February 17, 2010 at the latest.
  4. Update policies and procedures—Take a good look at your policies and procedures and determine what needs to be updated or enhanced for compliance with HITECH. Also, business associates of HIPAA covered-entities will now be subject to HHS audits and will need to be able to produce documentation (such as policies and procedures) proving that they have formal steps in place to safeguard PHI.


New bill may require employers to give sick employees five paid leave days

Legislators introduced a bill last week that, if passed, would require employers to provide at least five paid sick days to employees sent home (and told to stay home) with a contagious illness. The bill is called the Emergency Influenza Containment Act and was introduced by Representative George Miller (D-CA), chairman of the House Education and Labor Committee.

If signed into law, the Emergency Influenza Containment Act would take effect 15 days after being signed and expire after 2 years.

Who would be impacted?

The Emergency Influenza Containment Act would apply to businesses with 15 or more employees. Only employees who are sent home with a contagious illness will be eligible for the five paid sick days. Employees who choose to stay home on their own would not be guaranteed paid sick days.

Why the Emergency Influenza Containment Act?

According to Representative Miller, the motivating factor behind this bill was the fact that over 40 million workers do not have paid sick days. 

Data from the Bureau of Labor Statistics reveal the following:

  • 39% of all private-sector workers don’t have paid sick days
  • Of the lowest 25% of wage earners, 63% don’t have paid sick days

On top of all this, Center for Disease Control (CDC) statistics show that a sick employee at work infects one in ten of his or her co-workers.

Will the Act really serve its purpose?

Or will more employers opt to let workers with a contagious illness simply stay at work because they can’t afford to pay them for five days of absence?

When employers simply cannot afford to lose vital employees for 5 days at a time, the best course of action to take is prevention. Encourage employees to wash hands frequently, cover their mouths when they cough or sneeze and keep all surfaces in the office germ free.

Here’s what one company is doing:

To keep up the staffing levels necessary for “business as usual” and keep employees out of work for shorter lengths of time, Fidelity Investments is offering employees just-in-case prescriptions of Tamiflu. They’ve contracted with a physicians group that will come to Fidelity’s headquarters and do screenings to see if (given each employee’s medical history) it would be appropriate to prescribe Tamiflu.

This could help employees by lessening both the duration and the severity of their flu (when taken on the first day of illness) so they can return to work sooner.



Three changes to Massachusetts Fair Share Contribution (FSC) law employers need to know effective 10/1/09

Effective October 1, 2009, the Massachusetts Division of Health Care Finance and Policy (DHCFP) has approved and adopted an amendment to the state’s Fair Share Contribution (FSC) regulations (114.5 CMR 16.00).

Among the amendments are several technical changes that clarify compliance requirements for businesses subject to the law (Massachusetts employers with 11 or more full-time equivalent employees). Although most of the amendments made are relatively minor, there are three notable revisions that employers should be aware of.

  1. Removal of the majority of time rule: The FSC regulations originally stated that, for the purpose of calculating the percentage of full-time employees enrolled in their health plan, employers would count an employee who worked both full-time and part-time hours during a given quarter as either full-time or part-time based on whether they were full-time or part-time for the majority of the quarter. The new FSC rules delete this confusing provision and now simply require employers to report both the number of full-time employees enrolled in their health plan and on their payroll as of the last day of the quarter under review.
  2. Group Health Plan Documentation Requirement: Under the FSC regulations, employers who offer and contribute to their employees’ group health plan must maintain documentation on it. This documentation must include a written plan description for each plan offered as well as copies of all written communication to employees about plan offerings. This documentation must contain information on benefits eligibility (including the minimum number of hours employees must work in order to be eligible for benefits) and information on premium contributions. Also, the written plan description must give evidence that the group health plan was in place during the quarter under review.
  3. Premium Reimbursement Arrangements are now recognized as group health plans: However, this is only true provided that employers have written documentation designating specific insurance plans for use by employers.

As mentioned earlier, these new FSC regulations are now in effect and employers will need to immediately take all necessary steps to ensure compliance with them.

Employers can find the full text of the newly revised FSC law on the Division of Health Care Finance and Policy (DHCFP) page of www.mass.gov.


“What’s fair is fair” may not always be the case

Two years after Massachusetts’ landmark health insurance law became effective in 2006, the state’s 4 Division of Unemployment Assistance auditors began knocking on business’ doors.

Their targets were employers who provided incomplete or inconsistent information to the state in earlier reports on their offering of and contribution to employees’ insurance.

As most of us, if not all of us know, the Commonwealth of Massachusetts requires companies with 11-50 full-time employees to either:

  • Have at least 25% of full-time employees enrolled in the employer’s group health plan

-or –

  • Offer to pay at least 33% of health plan premium costs for full-time employees working 90 days or more. 

Companies with 51 or more full-time employees are required to meet both of the above requirements or have at least 75% of their full-time employees enrolled in their group health plan.

As of late, the Commonwealth has audited 426 companies and found 172 (or 40%) had violated the above requirements and thus owed an additional $5 million to their workers’ health insurance premiums.

But is it really their fault?

The easy answer to this question is “yes”, however, the issue we are dealing with here is a complicated one. Here are a couple of reasons why.

Laws are confusing for employers:

Fair Share Contribution rules are so confusing that employers are having a very difficult time complying with them. 38 of the 172 companies who failed the audit have appealed.

On top of keeping their businesses afloat in a downturn economy, employers need to stay on top of very dynamic Federal and State laws and very often find themselves in way over their heads.

Some industries (and companies) have a harder time complying than others:

Companies in the staffing, restaurant and retail industries are among those struggling the most to comply with this law. Here’s an example how for some businesses it can be difficult, if not nearly impossible, to comply with these rules.

Let’s say you’re the owner of a local restaurant chain with 3 locations in Massachusetts and a total of 55 full-time employees as defined by the Commonwealth. Of these 55 employees, 28 are students and young adults still covered under their parents’ plans and 13 are ages 65+ and covered by Medicare. Of the 14 remaining employees, more than half are married to spouses that have employer-sponsored insurance.

What this all means is that employers such as this restaurant owner could offer to pay anywhere from 33 to 100 percent of employees’ premiums but if just one of the 14 employees not covered under their parents’ plans or Medicare waives coverage, they will not be in compliance with just a bit shy of 24% plan participation.

Consumer advocates are encouraging the state to make exceptions for employers that cannot entice 25% of their workforce to enroll in their plan but the state has yet to follow their advice. What are your thoughts on this?

Should employers be “penalized” for hiring workers that are covered elsewhere?

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