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Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC
Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC
Basic ERISA Seminar
By
Larry Grudzien
Attorney at Law
Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC
What is ERISA?
• “ERISA” stands for the Employee Retirement Income Security Act of 1974
(Pub.L. 93-406, 88 Stat. 829, enacted 1974-09-02.
• ERISA is comprehensive federal legislation, first enacted in 1974 and
amended many times since then.
• Title I of ERISA is part of the labor laws of the United States and governs
the structure of “employee benefits plans.”
• For most plans, it requires detailed disclosure to covered individuals,
employees and beneficiaries).
• For many plans, it requires detailed reporting to the government (mainly
on Form 5500).
3
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• ERISA Title I also imposes a strict fiduciary code of conduct on many of
those who sponsor and administer ERISA plans.
• In addition, there is a federal mechanism for enforcing rights and duties
with respect to ERISA plans, and it preempts a large body of state law.
• The Department of Labor (DOL) enforces ERISA Title I, mainly through its
Employee Benefits Security Administration (EBSA) (formerly called
PWBA).
• Failure to comply with ERISA’s requirements can be quite costly, either
through DOL enforcement actions and penalty assessments or through
employee lawsuits.
4
What is ERISA?
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• Virtually all private-sector employers are subject to ERISA - there is no
size exemption.
• This includes corporations, partnerships, and sole proprietorships.
• Remember, non-profit organizations are covered as well.
• However, the plans of governmental employers and of churches are
exempt from the application of ERISA Title I.
5
Who must comply?
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• If an employer sponsors a plan subject to ERISA, it must comply with its
many requirements, but it also enjoys many protections.
• Advantages of ERISA status
 Employees and beneficiaries may not sue in state court.
 Courts apply a standard of review more favorable to the plan.
6
Why is it important to determine if
employer sponsors an ERISA plan?
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• Many employee benefit arrangements that provide non-pension fringe
benefits are “employee welfare benefit plans” covered by ERISA.
• However, there are important exemptions and safe harbors provided for
certain categories of employee benefits.
• The definition of ERISA welfare benefit plan contains the following three
basic elements:
 there must be a plan, fund or program;
 that is established or maintained by an employer, and
 for the purpose of providing the specified benefits to participants and
beneficiaries.
7
What Plans must Comply?
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• In determining whether there is a “plan, fund or program” within the
meaning of the ERISA definition, the courts ask whether from the
surrounding circumstances a reasonable person could ascertain:
 the intended benefits;
 a class of beneficiaries;
 the source of financing; and
 the procedures for receiving benefits
• In addition, under Fort Halifax Packing Co. v. Coyne (482 U.S.1, 8 EBC
1729(1987) S. Ct. provides that a plan exists only when there is a
commitment to pay benefits systematically, including an ongoing
administrative responsibility or scheme to determine eligibility and
calculate benefits.
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Is There a Plan, Fund, or
Program?
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• Some Arrangements Do Not Qualify
 Even though it is easy to satisfy the basic “plan, fund or program” test, some
arrangements do not qualify.
 For example, where an employer offered only a one-time, lump-sum severance
bonus, there was no ongoing administrative scheme and therefore the bonus was
not an ERISA benefit .
• Written Document Is Needed to Create a Plan, Fund or Program
 It should be recognized that no document is necessary for a plan to exist under
ERISA, if from the surrounding circumstances the above elements of a plan, fund
or program can be ascertained .
 When the necessary elements of a plan can be ascertained, however, maintaining
the plan without a written document is a violation of ERISA.
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Is There a Plan, Fund, or
Program?
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• An Employer need not to do much to establish or maintain a plan.
• Issue is resolved in self-insured arrangements.
• Issue is more uncertain in insured arrangements
 Purchasing Insurance is employer maintenance.
 Effect of Voluntary Plans Safe Harbor.
• Individual insurance policies can create an ERISA plan.
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Is the Plan, Fund, or Program
Employer- Established/Maintained?
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• Specified listed benefits include:
 medical, surgical or hospital care or benefits
 benefits in the event of sickness, accident, disability, death or unemployment,
 vacation benefits
 apprenticeship or other training benefits,
 daycare centers
 scholarship funds
 pre-paid legal services
 holiday and severance benefits and
 housing assistance benefits
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Does the Plan Provide the Type
of Benefits Listed in ERISA?
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• Who are Participants and Beneficiaries?
 Current employees.
 Beneficiaries a person designated by a participant .
 Retired employees and COBRA qualified beneficiaries can be if they are entitled
to benefits.
• Plans Covering Self-Employed Individuals or partners:
 Not considered an ERISA plan.
• Plans Covering Only One Employee (or Former Employee:
 Can be if covers non-executive.
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Does the Plan Provide the Type
of Benefits Listed in ERISA?
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• Statutory and Regulatory exemptions include:
 Government, Church and Other Statutory Exemptions
 These include programs maintained solely to comply with state law
requirements:
 Workers Compensation;
 Unemployment; or
 Disability Laws.
13
Important Statutory and
Regulatory Exemptions
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• Statutory and Regulatory exemptions include:
 Payroll Practice Exemptions - This includes payment of:
 wages, overtime pay, shift premiums, and holiday or weekend premiums ;
 unfunded sick-pay or income replacement benefits ;and
 vacation, holiday, jury duty and similar pay.
 To qualify for this exemption, the amounts must be paid out of the employer’s
general assets.
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Important Statutory and
Regulatory Exemptions
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Important Statutory and
Regulatory Exemptions
• Statutory and Regulatory exemptions include:
 “Voluntary Employee-Pay-All” Exemption - The employer allows an insurance
company to sell voluntary policies to interested employees who pay the full cost
of the coverage.
 Permits employees to pay their premiums through payroll deductions and permits the
employer to forward the deductions to the insurer.
 However, the employer may not make any contribution toward coverage and the insurer
may not pay the employer for being allowed into the workplace.
 The employer may not “endorse” the program - This element is the key element in
treating the program as an ERISA benefit. What makes up an endorsement?
 Selecting insurers
 Negotiating terms or design
 Linking plan coverage to employee status
 Using employer’s name
 Recommending plan to employees
 Doing more than permitted payroll deduction
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• Cafeteria Plan – No, but Health FSA is covered
• Insured Major Medical Coverage - Yes
• HMOs - Yes
• Dental coverage - Yes
• DCAP - No
• AD&D Coverage -Yes
• GTL coverage -Yes
• LTD Coverage - Yes
• PTO Coverage – No, payroll practice
• Adoption Assistance - No
• Educational Assistance - No
• STD Coverage – Maybe if not payroll practice
• Severance Coverage - Yes
• Voluntary Insurance - no
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Examples of Benefits: Are
They Subject?
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• Plan document must exist for each plan.
• Plan terms must be followed .
• Strict fiduciary standards must be followed.
• Fidelity bond must be purchased to cover every person who handles plan
funds.
• Summary plan description (SPD) must be furnished automatically to plan
participants.
• Summary of material modification (SMM) must be furnished automatically
to plan participants when a plan is amended.
• Copies of certain plan documents must be furnished to participants and
beneficiaries on written request.
17
Key ERISA Requirements
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• Form 5500 must be filed annually for each plan (subject to important
exemptions, especially for small plans).
• Summary annual report (summarizing Form 5500 information) must be
furnished automatically to plan participants for a plan that files a Form
5500 (except totally unfunded welfare plans).
• Claim procedures must be established and carefully followed when
processing benefit claims and when reviewing appeals of denied claims.
• Plan assets, including participant contributions, may be used only to pay
plan benefits and reasonable administrative expenses.
• For a few welfare plans, plan assets may have to be held in trust.
• Group health plans must conform to applicable mandates like COBRA and
HIPAA.
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Key ERISA Requirements
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• Plan must be established and maintained through a written document.
 ERISA requires that every welfare plan “be established and maintained pursuant
to a written instrument.”
 A written instrument does the following:
 Participants are on notice of benefits and their own benefits under the plan.
 Plan administrator is provided guidelines by which to make decisions
• ERISA does not provide specific format or content requirements.
• Insured benefit requirements – use of “wrap documents.”
• A wrap document fills in missing ERISA requirements.
• Can a single document serve as both plan document and SPD?
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Plan Document Requirements
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• Consequences of Failure to Comply:
 No Specific Penalties
 Inability to Respond to Written Participant Requests
 Benefits Lawsuits May Be Based on Past Practice and Similar Evidence
 Less Favorable Standard of Review in Benefits Lawsuits
 Limited Ability to Amend or Terminate Plan
 Fiduciary Duty to Follow Plan Document
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Plan Document Requirements
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• ERISA Required Plan provisions:
 Named Fiduciary
 Procedures for allocation of responsibilities
 Funding policy
 How payments are made
 Claims procedures
 Amendment procedures
 Distribution of assets on plan termination
 Required provisions for group health plans:
 COBRA & USERRA rules
 HIPAA Portability, Special enrollment and nondiscrimination rules
 HIPAA Privacy and Security
 Minimum hospital stays after childbirth
 QMCSO rules
 Disclosures regarding remaining Federal Mandates and other Laws
21
Plan Document Requirements
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• ERISA’s fiduciary rules are distinguished from many other rules of
behavior by the following major characteristics:
 the rules incorporate a broad, functional definition of the term “fiduciary,” which
sweeps in all kinds of individuals and business entities depending on the duties
they actually perform in connection with ERISA plans;
 the standard of behavior expected from ERISA fiduciaries is very high;
 broadly-defined fiduciary responsibilities apply to every act taken in a fiduciary
capacity;
 certain specifically-enumerated transactions between an ERISA plan and
persons acting in connection with the plan are absolutely prohibited; and
 ERISA fiduciaries who breach their duties can be personally liable for damages
to the ERISA plan and for DOL penalties imposed in connection with fiduciary
breaches.
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Fiduciary Requirements
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• Automatic Fiduciaries:
 Named Fiduciaries
 Plan Administrators
 Trustees
 Others
• A plan must provide for one or more names fiduciaries who jointly or
severally have authority to control and manage the operation and
administration of the plan.
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Fiduciary Requirements
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• Functional Fiduciaries Persons or entities become ERISA fiduciaries to
the extent that they:
 Have discretionary authority or discretionary control regarding the management
of an ERISA plan;
 Have any authority or control respecting management or disposition of plan
assets;
 Render investment advice for a fee; or
 Have discretionary authority or discretionary responsibility in the administration
of the plan.
24
Fiduciary Requirements
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• Fiduciary Standard of Behavior One of Highest in Law
 The duties of care and integrity imposed on fiduciaries have been among the
highest, if not the very highest, in the common law .
 In enacting the ERISA fiduciary duty rules, Congress intended to incorporate
principles of the common law of trusts, tailored as necessary to employee
benefit plans.
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Fiduciary Requirements
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• The principal duties of ERISA fiduciaries are:
 To act solely in the best interest of plan participants and beneficiaries (the duty of
undivided loyalty);
 To use plan assets for the exclusive purpose of paying plan benefits or
reasonable expenses of plan administration (the exclusive benefit rule);
 To act with the care, skill, prudence and diligence that a prudent person in similar
circumstances would use ;
 To diversify the plan’s investments (if any) to minimize the risk of large losses;
and
 To act in accordance with the documents governing the plan.
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Fiduciary Requirements
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• Fiduciaries are liable for breaches that occur while they serve as
fiduciaries, but not for breaches in the period before they become
fiduciaries or after they cease to be fiduciaries.
• Liability includes:
 personal liability for losses caused to the plan;
 personal liability to restore to the plan any profits the fiduciary made through
the use of plan assets ; and
 other equitable or remedial relief, as a court may deem appropriate, including
removal of the fiduciary.
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Fiduciary Requirements
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• Fiduciary bonding requirements
 It is required if there are plan assets.
 Who must be bonded?
 Amount of Bond?
 An amount equal to at least 10% of the funds handled during the prior reporting year,
subject to a minimum of $1,000 and a maximum of $500,000.
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Fiduciary Requirements
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• Summary Plan Description
• Summary of Material Modifications
• Uniform Explanation of Benefits
• Summary Annual Reports
• Providing copies of documents on written request
• Making documents available at principal office
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Summary of Disclosure
Requirements
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• Which plans must comply?
 Almost every employee benefit plan must comply
• Are there any plans that are exempt?
 Exemption of employer-provided daycare centers
 Exemption of welfare plans for certain select employees
 Cafeteria plans - considered a fringe benefit plan, but health FSA must comply
• Note: No small plan exemption
30
Disclosure Requirements
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• Who is responsible for complying?
 Plan Administrator is responsible .
• Who must be furnished with SPD and SMMs
 In general, covered participants, but not beneficiaries
 Exceptions, the following must receive copy:
 COBRA Qualified Beneficiary
 QMCSO Alternative Recipient
 Spouse/Dependent of Deceased Participant
 Representatives or Guardians of Incapacitated Persons
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Disclosure Requirements
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 When must it be provided?
 Within 90 days for newly-covered participants.
 Within 120 days for new plans.
 Updated SPD is required every 5 (or 10) years.
 How must it be provided?
 Must be furnished in a way ”reasonably calculated to ensure actual receipt of the
material.”
 Must use method ”likely to result in full distribution”.
 Satisfactory method will depend on facts and circumstances.
 Furnish by Mail
 Furnish by In-hand delivery
 Electronic means
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Summary Plan Description (SPD)
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• General format and style requirements:
 Be sufficiently accurate and comprehensive to inform plan participants and
beneficiaries of their rights and obligations under the plan.
 Be written in a manner understandable to the average plan participant.
 Not have the effect of misleading, misinforming or failing to inform participants
and beneficiaries.
 Any description of exceptions, limitations, reductions, and other restrictions of
plan benefits must be apparent in the SPD.
33
Summary Plan Description (SPD)
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• The items to be included in a welfare plan SPD:
 Plan-identifying information
 Description of plan eligibility provisions
 Description of plan benefits
 Statement clearly identifying circumstances that may result in loss or denial of
benefits
 Description of plan amendment and termination provisions
 Description of plan subrogation provisions (if any)
 Information regarding plan contributions and funding
34
Summary Plan Description (SPD)
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• The items to be included in a welfare plan SPD:
 Information regarding plan contributions and funding.
 Information regarding claims procedures.
 Model statement of ERISA rights.
 Prominent offer of assistance in a non-English language, if it applies.
 Explanation of Plan’s Policy regarding Recovery of Overpaid benefits.
 Explanation of plan’s allocation policy for insurer refunds and similar payments.
 Discretionary authority to interpret plan terms and resolve factual disputes.
35
Summary Plan Description (SPD)
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• The following additional items must be included in the SPD for a group
health plan:
 Detailed description of group health plan benefit provisions;
 Description of the role of health insurers (i.e., whether a related insurer actually
insures plan benefits or merely provides administrative services for the plan);
 Description of group heath plan claims procedures;
 Description of effect of group health plan provider discounts;
 Group health plan provider incentives disclosure required.
 Information regarding COBRA coverage; and
 Disclosures regarding other federal mandates.
36
Summary Plan Description (SPD)
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• Who must be provided SMM?
 Same rules as SPD.
• What must the SMM report?
 Any “material” change in plan or any change in the information required in the
SPD.
• When must it be provided?
 Must be furnished within 210 days after the end of the plan year in which
change is adopted.
 Special rules for group health plans – 60 days if change is a material reduction.
37
Summary of Material
Modifications (SMM)
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• SPD will generally control where it conflicts with plan document.
• What constitutes sufficient conflict for rule?
• Effect of SPD disclaimers.
• Non-SPD summaries do not control over conflicting plan documents.
• SPD ambiguities may be construed against plan sponsor.
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Conflicts Between SPD/SMM &
Plan or Insurance Contract
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• HHS developed standards for plans to use in summarizing plan benefits and
coverage for participants.
• The required summaries will be a short “highlights” description of the plan.
• It must not exceed 4 pages in length and must not include print smaller than 12-point
font.
• The statute describes the information that must be covered by the summary.
• Plans will have until March 23, 2012, to begin using these new summaries.
39
Summary of Benefits and
Coverage
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• Deadline for summaries of material modification:
 A notice of any material modification must be given to participants at least 60
days prior to the date the plan modification is to become effective.
 This provision is generally effective March 23, 2012.
40
Summary of Benefits and
Coverage
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• Penalty for failure to provide new summary or SMM:
 A penalty of not more than $1,000 may apply for each willful failure to provide the
required plan summary or advance summary of a material modification.
 Each participant who fails to receive a required summary (or summary of material
modification) is counted separately in determining the amount of the penalty, so
it appears that a willful failure to timely provide 5 participants with a summary
could result in a fine of up to $5,000.
4141
Summary of Benefits and
Coverage
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• Standardized definitions:
 HHS promulgate regulations providing for the standardized definitions of terms
used in insured plans.
 The required four-page plan summary discussed previously must include these
definitions, to enable participants to better understand and compare coverage.
 The terms for which standardized definitions include many common terms.
42
Summary of Benefits and
Coverage
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• Written requests:
 What must provided?
 Copy of SPDs, plan documents, contracts and agreements.
 Must provide within 30 days of request.
 Failure to provide - penalty -$110 per day.
• Documents available for inspection:
 At the principal office of the plan administrator or employer (if different).
 Within 10 days of request.
43
Other Disclosures
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• Summary Annual Report (SARs)
 Summarizes the information on Form 5500,
 Plan administrator must furnish SARs to participants and others entitled to
receive SPD,
 Provided within 9 months of filing From 5500,
 Information required to be included in SAR is provided in Model SAR,
 Exemption - small welfare plans
44
Other Disclosures
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• The plan administrator of each separate ERISA plan must report specified
plan information annually to DOL .
• Exemption for certain plans:
 Complete exemption for small unfunded plans.
 Plans must have fewer than 100 “covered participants” at start of the plan year.
 Plans for certain select employees.
 Daycare centers.
 GIAs.
45
Reporting Requirements
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• Penalties apply for late or unfiled Forms 5500s.
• DOL may assess a civil penalty against a plan administrator of up to $1,100
per day from the date of failure or refusal to file.
• Penalties are cumulative - against each Form 5500 not filed.
• No statute of limitations.
46
Penalties for Non-Compliance
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• One form 5500 may be used for multiple ERISA benefits under single plan.
• How many Form 5500s are maintained by more than one employer?
47
How Many Forms are Required?
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 Due date of return:
 By end of 7th month after plan year, unless extended
 Extended by filing Form 5558 or extending employer’s return.
 What must be filed?
 Form 5500
 Schedule A
 Schedule C
 Financial schedules and accountant’s opinion, if funded
 Filed with DOL - paper or electronically.
48
Forms 5500: When? What?
Where?
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• ERISA plans must establish and maintain procedures under which
benefits can be requested by participants and beneficiaries and disputes
about benefit entitlements can be addressed.
• Claimant must exhaust plan’s procedures before filing suit.
• If plan has inadequate procedures, claimants may skip procedures and
directly to court.
49
Claim Procedures
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• The basic steps in any claims procedure are:
 a claim for benefits by a claimant or authorized representative;
 a benefit determination by the plan, with required notification to the claimant;
 an appeal by the claimant or authorized representative of any adverse
determination ;and
 the determination on review by the plan, with required notification to the claimant.
• Procedures can vary depending on the type of claim involved.
• Plan administrator is responsible for complying with procedures.
50
Basic Structure of Claims
Procedures
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• Claim must be in writing.
• Claim must be processed within certain timeframes:
 Health
 Disability
 Other
• Special notice requirements.
51
Initial Benefit Claim
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• Timeframes for deciding claims
• URGENT CARE CLAIM: ASAP < 72 hours (24 hours) no extensions
• PRE-SERVICE CLAIM : reasonable period < 15 days, or 15-day extension
w/ notice
• POST-SERVICE CLAIM: reasonable period < 30 days, or 15-day extension
w/ notice
• CONCURRENT CARE: when plan reverses pre-approval, in time to permit
appeal before treatment ends or is reduced, or when request for extension
involves urgent care, ASAP < 24 hours (if request is made w/in 24 hours of
end of treatment series)
• DISABILITY CLAIM: reasonable period < 45 days, or two 30-day
extensions w/ notice
• ALL OTHER CLAIMS: reasonable period < 90 days, or 90-day extension w/
notice
52
Processing Initial Claims
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• All adverse determinations must be in writing, understandable and must
address:
 The specific reasons for the denial and the plan provisions relied on.
 A description of any additional information required from the claimant.
 A description of the appeals process.
53
Initial Benefit Claim
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• A statement that a copy of “internal rules or guidelines” relied on in
denying the claim may be obtained on request and without cost; and
• A statement that a written explanation of any “scientific or clinical
judgment” relied on in denying the claim may be obtained on request
and without cost.
54
Initial Benefit Claim
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• Appeal must be filed at least 180 days after adverse determination.
• If no appeal, claimant loses right to file further claim with plan or in court.
• Once appeal is filed, claimant must receive “full and fair review” by
named fiduciary.
• Claimant must be permitted to submit written comments and access
documents.
55
Appeal Process
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• Adverse determinations must contain the following information:
 The specific reasons for the denial and the plan provisions relied on.
 A description of any additional information required from the claimant.
 A statement of the claimant’s right (discussed earlier) to obtain relevant
documents and other information.
56
Appeal Process
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• Adverse determinations must contain the following information:
 A description of any additional required or voluntary appeals and a statement
of the claimant’s right to sue
 For group health and disability claims, a statement that a copy of “internal
rules or guidelines” relied on in denying the claim may be obtained without
cost upon request and
 For group health and disability claims, a statement that a written explanation
of any “scientific or clinical judgment” relied on in denying the claim may be
obtained on request and without cost.
57
Appeal Process
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• Timeframes for deciding appeals
• URGENT CARE CLAIM : ASAP < 72 hours (24 hours) no extensions
• PRE-SERVICE CLAIM: reasonable period < 30 days no extensions
• POST-SERVICE CLAIM: reasonable period < 60 days no extensions
• CONCURRENT CARE DECISION: when plan reverses pre-approval,
before treatment ends or is reduced
• DISABILITY CLAIM: reasonable period < 45 days, or 45-day extension w/
notice
• ALL OTHER CLAIM: reasonable period < 60 days, or 60-day extension w/
notice
58
Processing Benefit Appeals
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• Appeal Process:
 Plans must comply with either a state external review process or the federal
external review process.
 If a state has in place an external review process offering at least as much
protection as the NAIC Model Act, an insurance company must comply with the
state law.
 Plans not subject to state law (self-insured employee benefit plans), or located in
states without external review laws as protective as the NAIC Model Act, must
comply with a federal external review process yet to be established.
59
Effective for Plans Beginning
After September 23, 2010
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• Appeal Process:
 HHS is authorized to deem the external review process of a plan or insurer, in
operation on March 23, 2010 (i.e., the enactment date of health care reform), to
be in compliance with either the state external review procedures) or the federal
procedures, if the expedited review requirements of the appeals regulations are
substantially met.
 HHS will issue additional guidance addressing how plans and insurers can
obtain certification of their procedures
60
Effective for Plans Beginning
After September 23, 2010
Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC
• Appeal Process:
 The agencies have provided an enforcement grace period for some (but not all)
of the additional internal claims and appeals requirements under health care
reform
 The grace period (originally available only until July 1, 2011) was intended to
provide plans and insurers more time to change plan procedures and to modify
computer systems to come into compliance. Originally, the agencies indicated
that they would not take any enforcement action against a group health plan
working in good faith to implement the additional standards with respect to
internal claims and appeals even though it did not yet have them in place.
 In March 2011, the grace period was modified and extended until plan years
beginning on or after January 1, 2012 (with one exception).
 Notably, the agencies indicated that no requirement would apply for plans to be
working in good faith to implement the additional standards for either the
extended or the original enforcement period.
6161
Effective for Plans Beginning
After September 23, 2010
Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC
• Specific recordkeeping requirements are imposed.
• Requires retention of records sufficient to document information that is
required by Form 5500.
• Retain the records to document the information on From 5500 for a period
of not less than 6 years after From 5500 is filed or would have been filed.
62
Recordkeeping Requirements
Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC
• Those “persons” who have reporting or certification requirements must
maintain records.
• Requirements apply to plan administrator, insurer, TPA and CPA.
• Applies to those plans who do not file Form 5500.
• Responsibilities can not be delegated.
63
Who Must Maintain Records?
Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC
• Records sufficient to verify information on Form 5500.
• Records subject to rules are defined broadly and include claims record.
• Summaries or recaps of actual records are not sufficient.
• Electronic records requirements.
64
What Records Must Be
Maintained?
Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC
Questions?
• Contact Larry Grudzien at:
 Go to my website:
 www.larrygrudzien.com or
 E-mail: larry@larrygrudzien.com or
 Phone: 708-717-9638
65

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Everything You Need to Know About ERISA

  • 1. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC
  • 2. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC Basic ERISA Seminar By Larry Grudzien Attorney at Law
  • 3. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC What is ERISA? • “ERISA” stands for the Employee Retirement Income Security Act of 1974 (Pub.L. 93-406, 88 Stat. 829, enacted 1974-09-02. • ERISA is comprehensive federal legislation, first enacted in 1974 and amended many times since then. • Title I of ERISA is part of the labor laws of the United States and governs the structure of “employee benefits plans.” • For most plans, it requires detailed disclosure to covered individuals, employees and beneficiaries). • For many plans, it requires detailed reporting to the government (mainly on Form 5500). 3
  • 4. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • ERISA Title I also imposes a strict fiduciary code of conduct on many of those who sponsor and administer ERISA plans. • In addition, there is a federal mechanism for enforcing rights and duties with respect to ERISA plans, and it preempts a large body of state law. • The Department of Labor (DOL) enforces ERISA Title I, mainly through its Employee Benefits Security Administration (EBSA) (formerly called PWBA). • Failure to comply with ERISA’s requirements can be quite costly, either through DOL enforcement actions and penalty assessments or through employee lawsuits. 4 What is ERISA?
  • 5. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Virtually all private-sector employers are subject to ERISA - there is no size exemption. • This includes corporations, partnerships, and sole proprietorships. • Remember, non-profit organizations are covered as well. • However, the plans of governmental employers and of churches are exempt from the application of ERISA Title I. 5 Who must comply?
  • 6. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • If an employer sponsors a plan subject to ERISA, it must comply with its many requirements, but it also enjoys many protections. • Advantages of ERISA status  Employees and beneficiaries may not sue in state court.  Courts apply a standard of review more favorable to the plan. 6 Why is it important to determine if employer sponsors an ERISA plan?
  • 7. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Many employee benefit arrangements that provide non-pension fringe benefits are “employee welfare benefit plans” covered by ERISA. • However, there are important exemptions and safe harbors provided for certain categories of employee benefits. • The definition of ERISA welfare benefit plan contains the following three basic elements:  there must be a plan, fund or program;  that is established or maintained by an employer, and  for the purpose of providing the specified benefits to participants and beneficiaries. 7 What Plans must Comply?
  • 8. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • In determining whether there is a “plan, fund or program” within the meaning of the ERISA definition, the courts ask whether from the surrounding circumstances a reasonable person could ascertain:  the intended benefits;  a class of beneficiaries;  the source of financing; and  the procedures for receiving benefits • In addition, under Fort Halifax Packing Co. v. Coyne (482 U.S.1, 8 EBC 1729(1987) S. Ct. provides that a plan exists only when there is a commitment to pay benefits systematically, including an ongoing administrative responsibility or scheme to determine eligibility and calculate benefits. 8 Is There a Plan, Fund, or Program?
  • 9. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Some Arrangements Do Not Qualify  Even though it is easy to satisfy the basic “plan, fund or program” test, some arrangements do not qualify.  For example, where an employer offered only a one-time, lump-sum severance bonus, there was no ongoing administrative scheme and therefore the bonus was not an ERISA benefit . • Written Document Is Needed to Create a Plan, Fund or Program  It should be recognized that no document is necessary for a plan to exist under ERISA, if from the surrounding circumstances the above elements of a plan, fund or program can be ascertained .  When the necessary elements of a plan can be ascertained, however, maintaining the plan without a written document is a violation of ERISA. 9 Is There a Plan, Fund, or Program?
  • 10. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • An Employer need not to do much to establish or maintain a plan. • Issue is resolved in self-insured arrangements. • Issue is more uncertain in insured arrangements  Purchasing Insurance is employer maintenance.  Effect of Voluntary Plans Safe Harbor. • Individual insurance policies can create an ERISA plan. 10 Is the Plan, Fund, or Program Employer- Established/Maintained?
  • 11. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Specified listed benefits include:  medical, surgical or hospital care or benefits  benefits in the event of sickness, accident, disability, death or unemployment,  vacation benefits  apprenticeship or other training benefits,  daycare centers  scholarship funds  pre-paid legal services  holiday and severance benefits and  housing assistance benefits 11 Does the Plan Provide the Type of Benefits Listed in ERISA?
  • 12. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Who are Participants and Beneficiaries?  Current employees.  Beneficiaries a person designated by a participant .  Retired employees and COBRA qualified beneficiaries can be if they are entitled to benefits. • Plans Covering Self-Employed Individuals or partners:  Not considered an ERISA plan. • Plans Covering Only One Employee (or Former Employee:  Can be if covers non-executive. 12 Does the Plan Provide the Type of Benefits Listed in ERISA?
  • 13. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Statutory and Regulatory exemptions include:  Government, Church and Other Statutory Exemptions  These include programs maintained solely to comply with state law requirements:  Workers Compensation;  Unemployment; or  Disability Laws. 13 Important Statutory and Regulatory Exemptions
  • 14. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Statutory and Regulatory exemptions include:  Payroll Practice Exemptions - This includes payment of:  wages, overtime pay, shift premiums, and holiday or weekend premiums ;  unfunded sick-pay or income replacement benefits ;and  vacation, holiday, jury duty and similar pay.  To qualify for this exemption, the amounts must be paid out of the employer’s general assets. 14 Important Statutory and Regulatory Exemptions
  • 15. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC Important Statutory and Regulatory Exemptions • Statutory and Regulatory exemptions include:  “Voluntary Employee-Pay-All” Exemption - The employer allows an insurance company to sell voluntary policies to interested employees who pay the full cost of the coverage.  Permits employees to pay their premiums through payroll deductions and permits the employer to forward the deductions to the insurer.  However, the employer may not make any contribution toward coverage and the insurer may not pay the employer for being allowed into the workplace.  The employer may not “endorse” the program - This element is the key element in treating the program as an ERISA benefit. What makes up an endorsement?  Selecting insurers  Negotiating terms or design  Linking plan coverage to employee status  Using employer’s name  Recommending plan to employees  Doing more than permitted payroll deduction 15
  • 16. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Cafeteria Plan – No, but Health FSA is covered • Insured Major Medical Coverage - Yes • HMOs - Yes • Dental coverage - Yes • DCAP - No • AD&D Coverage -Yes • GTL coverage -Yes • LTD Coverage - Yes • PTO Coverage – No, payroll practice • Adoption Assistance - No • Educational Assistance - No • STD Coverage – Maybe if not payroll practice • Severance Coverage - Yes • Voluntary Insurance - no 16 Examples of Benefits: Are They Subject?
  • 17. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Plan document must exist for each plan. • Plan terms must be followed . • Strict fiduciary standards must be followed. • Fidelity bond must be purchased to cover every person who handles plan funds. • Summary plan description (SPD) must be furnished automatically to plan participants. • Summary of material modification (SMM) must be furnished automatically to plan participants when a plan is amended. • Copies of certain plan documents must be furnished to participants and beneficiaries on written request. 17 Key ERISA Requirements
  • 18. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Form 5500 must be filed annually for each plan (subject to important exemptions, especially for small plans). • Summary annual report (summarizing Form 5500 information) must be furnished automatically to plan participants for a plan that files a Form 5500 (except totally unfunded welfare plans). • Claim procedures must be established and carefully followed when processing benefit claims and when reviewing appeals of denied claims. • Plan assets, including participant contributions, may be used only to pay plan benefits and reasonable administrative expenses. • For a few welfare plans, plan assets may have to be held in trust. • Group health plans must conform to applicable mandates like COBRA and HIPAA. 18 Key ERISA Requirements
  • 19. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Plan must be established and maintained through a written document.  ERISA requires that every welfare plan “be established and maintained pursuant to a written instrument.”  A written instrument does the following:  Participants are on notice of benefits and their own benefits under the plan.  Plan administrator is provided guidelines by which to make decisions • ERISA does not provide specific format or content requirements. • Insured benefit requirements – use of “wrap documents.” • A wrap document fills in missing ERISA requirements. • Can a single document serve as both plan document and SPD? 19 Plan Document Requirements
  • 20. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Consequences of Failure to Comply:  No Specific Penalties  Inability to Respond to Written Participant Requests  Benefits Lawsuits May Be Based on Past Practice and Similar Evidence  Less Favorable Standard of Review in Benefits Lawsuits  Limited Ability to Amend or Terminate Plan  Fiduciary Duty to Follow Plan Document 20 Plan Document Requirements
  • 21. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • ERISA Required Plan provisions:  Named Fiduciary  Procedures for allocation of responsibilities  Funding policy  How payments are made  Claims procedures  Amendment procedures  Distribution of assets on plan termination  Required provisions for group health plans:  COBRA & USERRA rules  HIPAA Portability, Special enrollment and nondiscrimination rules  HIPAA Privacy and Security  Minimum hospital stays after childbirth  QMCSO rules  Disclosures regarding remaining Federal Mandates and other Laws 21 Plan Document Requirements
  • 22. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • ERISA’s fiduciary rules are distinguished from many other rules of behavior by the following major characteristics:  the rules incorporate a broad, functional definition of the term “fiduciary,” which sweeps in all kinds of individuals and business entities depending on the duties they actually perform in connection with ERISA plans;  the standard of behavior expected from ERISA fiduciaries is very high;  broadly-defined fiduciary responsibilities apply to every act taken in a fiduciary capacity;  certain specifically-enumerated transactions between an ERISA plan and persons acting in connection with the plan are absolutely prohibited; and  ERISA fiduciaries who breach their duties can be personally liable for damages to the ERISA plan and for DOL penalties imposed in connection with fiduciary breaches. 22 Fiduciary Requirements
  • 23. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Automatic Fiduciaries:  Named Fiduciaries  Plan Administrators  Trustees  Others • A plan must provide for one or more names fiduciaries who jointly or severally have authority to control and manage the operation and administration of the plan. 23 Fiduciary Requirements
  • 24. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Functional Fiduciaries Persons or entities become ERISA fiduciaries to the extent that they:  Have discretionary authority or discretionary control regarding the management of an ERISA plan;  Have any authority or control respecting management or disposition of plan assets;  Render investment advice for a fee; or  Have discretionary authority or discretionary responsibility in the administration of the plan. 24 Fiduciary Requirements
  • 25. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Fiduciary Standard of Behavior One of Highest in Law  The duties of care and integrity imposed on fiduciaries have been among the highest, if not the very highest, in the common law .  In enacting the ERISA fiduciary duty rules, Congress intended to incorporate principles of the common law of trusts, tailored as necessary to employee benefit plans. 25 Fiduciary Requirements
  • 26. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • The principal duties of ERISA fiduciaries are:  To act solely in the best interest of plan participants and beneficiaries (the duty of undivided loyalty);  To use plan assets for the exclusive purpose of paying plan benefits or reasonable expenses of plan administration (the exclusive benefit rule);  To act with the care, skill, prudence and diligence that a prudent person in similar circumstances would use ;  To diversify the plan’s investments (if any) to minimize the risk of large losses; and  To act in accordance with the documents governing the plan. 26 Fiduciary Requirements
  • 27. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Fiduciaries are liable for breaches that occur while they serve as fiduciaries, but not for breaches in the period before they become fiduciaries or after they cease to be fiduciaries. • Liability includes:  personal liability for losses caused to the plan;  personal liability to restore to the plan any profits the fiduciary made through the use of plan assets ; and  other equitable or remedial relief, as a court may deem appropriate, including removal of the fiduciary. 27 Fiduciary Requirements
  • 28. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Fiduciary bonding requirements  It is required if there are plan assets.  Who must be bonded?  Amount of Bond?  An amount equal to at least 10% of the funds handled during the prior reporting year, subject to a minimum of $1,000 and a maximum of $500,000. 28 Fiduciary Requirements
  • 29. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Summary Plan Description • Summary of Material Modifications • Uniform Explanation of Benefits • Summary Annual Reports • Providing copies of documents on written request • Making documents available at principal office 29 Summary of Disclosure Requirements
  • 30. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Which plans must comply?  Almost every employee benefit plan must comply • Are there any plans that are exempt?  Exemption of employer-provided daycare centers  Exemption of welfare plans for certain select employees  Cafeteria plans - considered a fringe benefit plan, but health FSA must comply • Note: No small plan exemption 30 Disclosure Requirements
  • 31. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Who is responsible for complying?  Plan Administrator is responsible . • Who must be furnished with SPD and SMMs  In general, covered participants, but not beneficiaries  Exceptions, the following must receive copy:  COBRA Qualified Beneficiary  QMCSO Alternative Recipient  Spouse/Dependent of Deceased Participant  Representatives or Guardians of Incapacitated Persons 31 Disclosure Requirements
  • 32. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC  When must it be provided?  Within 90 days for newly-covered participants.  Within 120 days for new plans.  Updated SPD is required every 5 (or 10) years.  How must it be provided?  Must be furnished in a way ”reasonably calculated to ensure actual receipt of the material.”  Must use method ”likely to result in full distribution”.  Satisfactory method will depend on facts and circumstances.  Furnish by Mail  Furnish by In-hand delivery  Electronic means 32 Summary Plan Description (SPD)
  • 33. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • General format and style requirements:  Be sufficiently accurate and comprehensive to inform plan participants and beneficiaries of their rights and obligations under the plan.  Be written in a manner understandable to the average plan participant.  Not have the effect of misleading, misinforming or failing to inform participants and beneficiaries.  Any description of exceptions, limitations, reductions, and other restrictions of plan benefits must be apparent in the SPD. 33 Summary Plan Description (SPD)
  • 34. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • The items to be included in a welfare plan SPD:  Plan-identifying information  Description of plan eligibility provisions  Description of plan benefits  Statement clearly identifying circumstances that may result in loss or denial of benefits  Description of plan amendment and termination provisions  Description of plan subrogation provisions (if any)  Information regarding plan contributions and funding 34 Summary Plan Description (SPD)
  • 35. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • The items to be included in a welfare plan SPD:  Information regarding plan contributions and funding.  Information regarding claims procedures.  Model statement of ERISA rights.  Prominent offer of assistance in a non-English language, if it applies.  Explanation of Plan’s Policy regarding Recovery of Overpaid benefits.  Explanation of plan’s allocation policy for insurer refunds and similar payments.  Discretionary authority to interpret plan terms and resolve factual disputes. 35 Summary Plan Description (SPD)
  • 36. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • The following additional items must be included in the SPD for a group health plan:  Detailed description of group health plan benefit provisions;  Description of the role of health insurers (i.e., whether a related insurer actually insures plan benefits or merely provides administrative services for the plan);  Description of group heath plan claims procedures;  Description of effect of group health plan provider discounts;  Group health plan provider incentives disclosure required.  Information regarding COBRA coverage; and  Disclosures regarding other federal mandates. 36 Summary Plan Description (SPD)
  • 37. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Who must be provided SMM?  Same rules as SPD. • What must the SMM report?  Any “material” change in plan or any change in the information required in the SPD. • When must it be provided?  Must be furnished within 210 days after the end of the plan year in which change is adopted.  Special rules for group health plans – 60 days if change is a material reduction. 37 Summary of Material Modifications (SMM)
  • 38. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • SPD will generally control where it conflicts with plan document. • What constitutes sufficient conflict for rule? • Effect of SPD disclaimers. • Non-SPD summaries do not control over conflicting plan documents. • SPD ambiguities may be construed against plan sponsor. 38 Conflicts Between SPD/SMM & Plan or Insurance Contract
  • 39. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • HHS developed standards for plans to use in summarizing plan benefits and coverage for participants. • The required summaries will be a short “highlights” description of the plan. • It must not exceed 4 pages in length and must not include print smaller than 12-point font. • The statute describes the information that must be covered by the summary. • Plans will have until March 23, 2012, to begin using these new summaries. 39 Summary of Benefits and Coverage
  • 40. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Deadline for summaries of material modification:  A notice of any material modification must be given to participants at least 60 days prior to the date the plan modification is to become effective.  This provision is generally effective March 23, 2012. 40 Summary of Benefits and Coverage
  • 41. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Penalty for failure to provide new summary or SMM:  A penalty of not more than $1,000 may apply for each willful failure to provide the required plan summary or advance summary of a material modification.  Each participant who fails to receive a required summary (or summary of material modification) is counted separately in determining the amount of the penalty, so it appears that a willful failure to timely provide 5 participants with a summary could result in a fine of up to $5,000. 4141 Summary of Benefits and Coverage
  • 42. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Standardized definitions:  HHS promulgate regulations providing for the standardized definitions of terms used in insured plans.  The required four-page plan summary discussed previously must include these definitions, to enable participants to better understand and compare coverage.  The terms for which standardized definitions include many common terms. 42 Summary of Benefits and Coverage
  • 43. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Written requests:  What must provided?  Copy of SPDs, plan documents, contracts and agreements.  Must provide within 30 days of request.  Failure to provide - penalty -$110 per day. • Documents available for inspection:  At the principal office of the plan administrator or employer (if different).  Within 10 days of request. 43 Other Disclosures
  • 44. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Summary Annual Report (SARs)  Summarizes the information on Form 5500,  Plan administrator must furnish SARs to participants and others entitled to receive SPD,  Provided within 9 months of filing From 5500,  Information required to be included in SAR is provided in Model SAR,  Exemption - small welfare plans 44 Other Disclosures
  • 45. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • The plan administrator of each separate ERISA plan must report specified plan information annually to DOL . • Exemption for certain plans:  Complete exemption for small unfunded plans.  Plans must have fewer than 100 “covered participants” at start of the plan year.  Plans for certain select employees.  Daycare centers.  GIAs. 45 Reporting Requirements
  • 46. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Penalties apply for late or unfiled Forms 5500s. • DOL may assess a civil penalty against a plan administrator of up to $1,100 per day from the date of failure or refusal to file. • Penalties are cumulative - against each Form 5500 not filed. • No statute of limitations. 46 Penalties for Non-Compliance
  • 47. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • One form 5500 may be used for multiple ERISA benefits under single plan. • How many Form 5500s are maintained by more than one employer? 47 How Many Forms are Required?
  • 48. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC  Due date of return:  By end of 7th month after plan year, unless extended  Extended by filing Form 5558 or extending employer’s return.  What must be filed?  Form 5500  Schedule A  Schedule C  Financial schedules and accountant’s opinion, if funded  Filed with DOL - paper or electronically. 48 Forms 5500: When? What? Where?
  • 49. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • ERISA plans must establish and maintain procedures under which benefits can be requested by participants and beneficiaries and disputes about benefit entitlements can be addressed. • Claimant must exhaust plan’s procedures before filing suit. • If plan has inadequate procedures, claimants may skip procedures and directly to court. 49 Claim Procedures
  • 50. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • The basic steps in any claims procedure are:  a claim for benefits by a claimant or authorized representative;  a benefit determination by the plan, with required notification to the claimant;  an appeal by the claimant or authorized representative of any adverse determination ;and  the determination on review by the plan, with required notification to the claimant. • Procedures can vary depending on the type of claim involved. • Plan administrator is responsible for complying with procedures. 50 Basic Structure of Claims Procedures
  • 51. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Claim must be in writing. • Claim must be processed within certain timeframes:  Health  Disability  Other • Special notice requirements. 51 Initial Benefit Claim
  • 52. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Timeframes for deciding claims • URGENT CARE CLAIM: ASAP < 72 hours (24 hours) no extensions • PRE-SERVICE CLAIM : reasonable period < 15 days, or 15-day extension w/ notice • POST-SERVICE CLAIM: reasonable period < 30 days, or 15-day extension w/ notice • CONCURRENT CARE: when plan reverses pre-approval, in time to permit appeal before treatment ends or is reduced, or when request for extension involves urgent care, ASAP < 24 hours (if request is made w/in 24 hours of end of treatment series) • DISABILITY CLAIM: reasonable period < 45 days, or two 30-day extensions w/ notice • ALL OTHER CLAIMS: reasonable period < 90 days, or 90-day extension w/ notice 52 Processing Initial Claims
  • 53. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • All adverse determinations must be in writing, understandable and must address:  The specific reasons for the denial and the plan provisions relied on.  A description of any additional information required from the claimant.  A description of the appeals process. 53 Initial Benefit Claim
  • 54. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • A statement that a copy of “internal rules or guidelines” relied on in denying the claim may be obtained on request and without cost; and • A statement that a written explanation of any “scientific or clinical judgment” relied on in denying the claim may be obtained on request and without cost. 54 Initial Benefit Claim
  • 55. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Appeal must be filed at least 180 days after adverse determination. • If no appeal, claimant loses right to file further claim with plan or in court. • Once appeal is filed, claimant must receive “full and fair review” by named fiduciary. • Claimant must be permitted to submit written comments and access documents. 55 Appeal Process
  • 56. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Adverse determinations must contain the following information:  The specific reasons for the denial and the plan provisions relied on.  A description of any additional information required from the claimant.  A statement of the claimant’s right (discussed earlier) to obtain relevant documents and other information. 56 Appeal Process
  • 57. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Adverse determinations must contain the following information:  A description of any additional required or voluntary appeals and a statement of the claimant’s right to sue  For group health and disability claims, a statement that a copy of “internal rules or guidelines” relied on in denying the claim may be obtained without cost upon request and  For group health and disability claims, a statement that a written explanation of any “scientific or clinical judgment” relied on in denying the claim may be obtained on request and without cost. 57 Appeal Process
  • 58. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Timeframes for deciding appeals • URGENT CARE CLAIM : ASAP < 72 hours (24 hours) no extensions • PRE-SERVICE CLAIM: reasonable period < 30 days no extensions • POST-SERVICE CLAIM: reasonable period < 60 days no extensions • CONCURRENT CARE DECISION: when plan reverses pre-approval, before treatment ends or is reduced • DISABILITY CLAIM: reasonable period < 45 days, or 45-day extension w/ notice • ALL OTHER CLAIM: reasonable period < 60 days, or 60-day extension w/ notice 58 Processing Benefit Appeals
  • 59. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Appeal Process:  Plans must comply with either a state external review process or the federal external review process.  If a state has in place an external review process offering at least as much protection as the NAIC Model Act, an insurance company must comply with the state law.  Plans not subject to state law (self-insured employee benefit plans), or located in states without external review laws as protective as the NAIC Model Act, must comply with a federal external review process yet to be established. 59 Effective for Plans Beginning After September 23, 2010
  • 60. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Appeal Process:  HHS is authorized to deem the external review process of a plan or insurer, in operation on March 23, 2010 (i.e., the enactment date of health care reform), to be in compliance with either the state external review procedures) or the federal procedures, if the expedited review requirements of the appeals regulations are substantially met.  HHS will issue additional guidance addressing how plans and insurers can obtain certification of their procedures 60 Effective for Plans Beginning After September 23, 2010
  • 61. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Appeal Process:  The agencies have provided an enforcement grace period for some (but not all) of the additional internal claims and appeals requirements under health care reform  The grace period (originally available only until July 1, 2011) was intended to provide plans and insurers more time to change plan procedures and to modify computer systems to come into compliance. Originally, the agencies indicated that they would not take any enforcement action against a group health plan working in good faith to implement the additional standards with respect to internal claims and appeals even though it did not yet have them in place.  In March 2011, the grace period was modified and extended until plan years beginning on or after January 1, 2012 (with one exception).  Notably, the agencies indicated that no requirement would apply for plans to be working in good faith to implement the additional standards for either the extended or the original enforcement period. 6161 Effective for Plans Beginning After September 23, 2010
  • 62. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Specific recordkeeping requirements are imposed. • Requires retention of records sufficient to document information that is required by Form 5500. • Retain the records to document the information on From 5500 for a period of not less than 6 years after From 5500 is filed or would have been filed. 62 Recordkeeping Requirements
  • 63. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Those “persons” who have reporting or certification requirements must maintain records. • Requirements apply to plan administrator, insurer, TPA and CPA. • Applies to those plans who do not file Form 5500. • Responsibilities can not be delegated. 63 Who Must Maintain Records?
  • 64. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC • Records sufficient to verify information on Form 5500. • Records subject to rules are defined broadly and include claims record. • Summaries or recaps of actual records are not sufficient. • Electronic records requirements. 64 What Records Must Be Maintained?
  • 65. Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC Questions? • Contact Larry Grudzien at:  Go to my website:  www.larrygrudzien.com or  E-mail: larry@larrygrudzien.com or  Phone: 708-717-9638 65

Editor's Notes

  1. Required provisions for group health plans: COBRA &amp; USERRA rules HIPAA Portability, Special enrollment and nondiscrimination rules HIPAA Privacy and Security Minimum hospital stays after childbirth QMCSO rules Disclosures regarding remaining Federal Mandates and other Laws