Debunking Benefits Compliance Myths

With all of the compliance pieces under the umbrella of benefits, it’s no wonder that there are common misconceptions.  It is important for an employer to be aware of the correct obligations in order to satisfy all aspects of benefits compliance.

Among some of the more frequent misconceptions are noted below.

• Myth: Small employers by Affordable Care Act (ACA) guidelines do not have any obligations related to ACA.
• Truth:   Even small employers have some responsibilities pertaining to ACA.  Some of these include:
  • The new hire waiting period for medical benefit eligibility cannot exceed 90 days.
  • Employers must provide the Health Insurance Exchange Notice to new hires. There is one notice geared towards employers who offer medical coverage and a separate notice for employers who do not offer medical coverage.
  • Employers offering medical coverage are required at time of initial enrollment and open enrollment to distribute to their plan participants a Summary of Benefits Coverage (SBC), typically created by the insurance carrier, and Uniform Glossary.
  • Even small employers with certain self-insured medical plans, such as Health Reimbursement Arrangements (HRAs) or level-funded plans, are responsible for paying the Patient-Centered Outcomes Research Institute (PCORI) fee via Tax Form 720.
• Myth: Employers with less than 20 employees are not required to offer a COBRA continuation of benefits when an employee loses coverage.
• Truth:  Just because an employer has less than 20 employees and may not be subject to federal COBRA requirements does not necessarily mean that offering a continuation of benefits does not apply.  Many states have enacted laws that require a continuation of coverage be offered when an individual would not qualify for federal COBRA.
• Myth: If an Applicable Large Employer (ALE) has not offered full time employees health coverage and the IRS has not contacted them by now, the employer is not going to be responsible for paying any financial penalties.
• Truth:  Starting in 2015, the ACA requires ALEs to either “play” by offering affordable health coverage to their full time employees and dependent children or “pay” a penalty if the employer fails to provide affordable health coverage and at least one full time employee receives a premium tax credit/subsidy to help purchase coverage through the Health Insurance Marketplace.

In late 2017, the IRS started to send out letters (Letter 226J) to employers that, according to their records based on ACA reporting (Forms 1094-C and 1095-C) along with information regarding an individual having received a premium tax credit/subsidy, owe a financial penalty.  If an ALE has failed to satisfy the mandate, a letter from the IRS still may be forthcoming.

I encourage you to check with your benefits representative if you need assistance in dispelling any other potential myths related to your benefits.