Key Terms for Employers with Over 50 Employees
Number of Full-time Employees
It is important to capture information regarding all of your employees. Different compliance requirements apply to different group size segments. In the notes section, please include information regarding any part-time, temporary, seasonal, interns and contract employees in the notes section.
Employee Information
It is important to gather information regarding your employee population as it impacts the benefits that they are offered and the compliance requirements that they are subject to.
Current Group Benefit Plans
Different group policies have different compliance requirements.
Cafeteria Plans
These plans allow for your employees to contribute to their premium or spending accounts on a tax-free basis.
The IRS requires that this is done in a way that doesn’t discriminate in favor of the highly compensated employees. The non-discrimination tests can help you confirm this.
Employers that sponsor self-funded plans must also make sure that their plans do not discriminate against highly compensated employees.
ERISA Compliance
Every ERISA plan needs a written plan document that addresses the following, specific items; benefits and eligibility, the funding of the employee benefits, treatment of insurance refunds and rebates, procedures for claims and appeals, a designation of a named fiduciary, plan amendment and termination procedures, required provisions for group health plans, such as COBRA rights and HIPAA special enrollment, other legal provisions applicable to certain plans and the procedures for allocating and delegating plan responsibilities. There is no required format for this information to be shared, however it must be shared. This information is often NOT provided by your insurance carrier.
Every ERISA plan is required to have a Summary Plan Description (SPD) that addresses plan identifying information, benefits and eligibility rules, circumstances causing loss or denial of benefits, plan amendment, termination and subrogation provisions, contributions and funding, claims procedures, statement of ERISA rights, additional group health plan requirements and a prominent offer of assistance in a non-English language (if required). This information is often NOT provided by your insurance carrier.
The Summary of Material Modifications (SMM) modifies some of the information contained in the SPD without creating an entirely new SPD.
ACA Compliance
Different group sizes and different funding types are subject to different ACA requirements.
For small groups, with less than 50 lives there is a requirement to report to the IRS on behalf of employees that have elected minimum essential group coverage.
For groups with fully insured plans, this is handled by the insurance carriers.
For groups with self-funded plans, this may or may not be handled by the insurance carrier. It is important to confirm this information.
Applicable Large Employers (ALE’s) are defined as employers with 50 or more employees in the previous plan year.
ALE’s are required to complete the IRS reporting regarding individuals that have been offered and have enrolled in minimum value, affordable group coverage. However, an ALE’s may hire a 3rd party to assist with this.
ALE’s are required to offer minimum essential insurance coverage (MEC) to all eligible employees or risk a potential penalty.
The definition of MEC under the ACA is very broad and in fact most employer group insurance plans include MEC.
ALE’s are required to offer affordable insurance coverage to all eligible employees or risk a potential penalty.
A group health plan is considered affordable if the employee contribution amount, for employee only coverage on the least expensive available plan, is no more than 9.83% (in 2021) of the employee’s income. *Please note, this is regardless of which plan an employee enrolls in and if the employee enrolls his family.
ALE’s must offer minimum value (MV) coverage to their employees or face a potential penalty.
The insurance plan must cover 60% of the total allowed costs of benefits provided.
The plan must provide coverage for in-patient hospitalization and physician services.
Insurance Continuation (COBRA and State Continuation)
Often times, group health plans are required to offer insurance continuation.
COBRA – A group health plan is subject to COBRA if the group had 20 or more employees in the previous plan year.
Notices:
General notice – General description of COBRA rights under the plan. Must be provided within 90 days after plan coverage begins.
Election Notice – Describes right to COBRA coverage and how to make an election. An employer has between 14 and 44 days in order to issue this notice, depending on circumstances.
Notice of unavailability – Must be provided after a group health plan denies a request for COBRA coverage (or a request for an extension). An employer has between 14 and 44 days in order to issue this notice, depending on circumstances.
Notice of early termination - When a group health plan decides to terminate continuation coverage early, the plan must give the qualified beneficiary a notice of early termination. Must be provided as soon as possible.
State Continuation – Only groups with fully insured group medical plans are subject to State Continuation.
Form 5500
Form 5500 is intended to protect the rights and benefits of plan participants and beneficiaries by assuring that employee benefit plans are operated and managed in accordance with certain standards and that participants and beneficiaries are provided with or have access to sufficient plan information.
Who must file: Large funded plans, large unfunded plans, large insured plans, large combination unfunded/insured plans, multiple employer welfare arrangements and small funded plans. *A large plan is defined as a plan that has 100 or more employees or former participants on the 1st day of the plan year.
Who is exempt from filing: small unfunded plans, small insured plans, small combination unfunded/insured plans, unfunded or insured plans for certain select employees, employer-sponsored daycare centers, certain apprenticeship and training plans and plans not subject to ERISA.
If you are required to file form 5500 with the IRS you must file for each ERISA plan you sponsor that has 100 or more employee or former participants on the 1st day of the plan year.
If you are required to file Form 5500 you must provide participants and beneficiaries with a Summary Annual Report (SAR) 2 months after the Form 5500 is due.