Cobra Compliance – COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

Eligible Benefits – Health care Plans, Medical Spending Accounts, Dental Plans, Vision Plans, Hearing Plans, Prescription Drug Plans, Alcohol and Substance Abuse Plans, Mental Health Plans

Non-Eligible Benefits – Life Insurance, Disability Insurance, Retirement Plans, Vacation Plans

New Hires

Covered employees and covered spouses must be notified of their initial COBRA rights when they first join the plan.

COBRA Event

Covered individuals must be notified of their election rights to continue coverage after a qualifying event occurs. Employers have 30 days to notify the plan administrator (NueSynergy) when a loss occurs for any of the reasons listed above, except for divorce and change of status by a dependent. In those two instances, you have 60 days to notify the administrator. NueSynergy then has 14 days after notice from the Employer to notify the person who is entitled to COBRA coverage.

Qualifying events are events that cause an individual to lose their group health coverage. The type of qualifying event determines who the qualified beneficiaries are and the period of time that a plan must offer continuation coverage.

Qualifying events for covered employees if they cause the covered employee to lose coverage:

• Termination of the employee’s employment for any reason other than gross misconduct
• Reduction in the number of hours of employment

Qualifying events for a spouse and/or dependent child of a covered employee if they cause the spouse or dependent child to lose coverage:

• Termination of the covered employee’s employment for any reason other than gross misconduct
• Reduction in the hours worked by the covered employee
• Covered employee becomes entitled to Medicare
• Divorce or legal separation of the spouse from the covered employee
• Death of the covered employee

Qualifying event for a dependent child of a covered employee if it causes the child to lose coverage:

• Loss of dependent child status under the plan rules. Under the Patient Protection and Affordable Care Act, plans that offer coverage to children on their parents’ plan must make the coverage available until the adult child reaches the age of 26.

Payment Process:

Payment Amount – The amount a COBRA participant or their qualified beneficiaries are charged will not exceed the total costs paid by the employee and the employer, plus an additional 2 percent for administrative costs. The COBRA participant is typically responsible for paying the costs associated with COBRA continuation coverage.

Payment Timeline – When electing continuation coverage, the COBRA participant is not required to send any payment with their election form. They are required, however, to make an initial premium payment to NueSynergy within 45 days after the date of their COBRA election (that is the mail date on the election form, if using first-class mail). Failure to make any payment within that period of time could cause the COBRA participant to lose all COBRA rights.

Payment Method – NueSynergy will send a payment booklet with set premium due dates for the remaining months within the plan year. The COBRA participant will make their monthly premium payments by mailing a check or online via ACH.

COBRA Renewal – When the current group plan renews, an open enrollment notice with new plan rates and new payment book is sent to the COBRA participant should they choose to remain on COBRA continuation coverage.

Note: Some employers may subsidize or pay the entire cost of health coverage, including COBRA coverage, for terminating employees and their families as part of a severance agreement. If you are receiving this type of severance benefit, talk to your plan administrator about how this impacts your COBRA coverage or your special enrollment rights.

Compliance

Section 125 “Cafeteria” Plan – If offering a Flexible Spending Account as part of a benefits program, employers will also need to have a Section 125 Plan Document in place. A Cafeteria Plan (includes Premium Only Plans and Flexible Spending Accounts) allows for the pre-taxing of qualified employee insurance premiums and the employees’ use of pre-tax funds to pay for eligible expenses related to medical, dependent care, adoption, and transportation. Funds contributed pre-tax through these plans are not subject to federal, state, or Socials Security taxes. Participants in these plans can save on average between $0.25 to $0.49 on dollar contributed.
Employers also benefit as a result of the pre-tax advantage of these plans. For every participating employee, the employer will see a tax savings from reduced FUTA, FICA, SUTA, and Worker’s Compensation taxes.

If you have any questions about the compliance of your plan documents or need help implementing them, please Click Here for a free plan document review.

Premium Only “POP” Plan – For employers wanting to allow employees to deduct their portion of a company sponsored insurance premium pre-tax, they will need to implement a Premium Only Plan or “POP”. The premiums for the following types of group coverage can be paid pre-tax using a POP plan: Medical, Dental, Vision, Disability, Term Life Insurance
Employers and employees both benefit by having a POP plan in place. Employers experience a reduction in payroll taxes, as well as savings of 7.65% on FICA taxes. Employees are able to reduce their taxable income and increase their take home pay.
If you have any questions about the compliance of your plan documents or need help implementing them, please Click Here for a free plan document review.

Section 105 Plan Document – A Section 105 Plan Document will need to be drafted if implementing an employer self-funded Health Reimbursement Arrangement (HRA) as part of a group benefits program. These plans offer a sponsoring employer a level of flexibility in design and reimbursement guidelines. As an employer self-funded plan, any reimbursement for eligible expenses are tax deductible for the employer. They’re also tax free for the employee. The following are several key components an employer should be aware of when ensuring an HRA plan is compliant: HIPAA Privacy Rules, COBRA Rules, ERISA Plan Rules, Medicare Secondary Payer (MSP) provisions, Affordable Care Act (ACA) Rules
If you have any questions about the compliance of your plan documents or need help implementing them, please Click Here for a free plan document review.

Discrimination Testing – As a plan sponsor of a Section 125 or Section 105 plan, an employer is required to perform discrimination testing each year on their plan. The IRS-required tests are designed to ensure that Key and Highly Compensated Employees within the company receive nontaxable benefits in balance with all employees.
In order to perform the discrimination testing, five separate tests are run on the plan:

Eligibility Test – At least some non-highly compensated employees must be eligible to participate in the plan.
Contributions Test – All employees should receive the same amount of employer contributions
Benefits Test – The eligibility rules should be the same for all employees, and the same benefits must be provided to all employees.
Key Employee Concentration Test – This test compares the non-taxable health benefits provided to Key Employees to the non-taxable benefit provided to all employees. The value of non-taxable benefits provided to Key Employees cannot exceed 25% of the total non-taxable benefits provided under the plan.
55% Average Benefit Test – This test looks only at the dependent care portion of the FSA plan. The average dollar amount of benefits elected by non‐highly compensated employees must be at least 55% of the average dollar amount of benefits elected by highly compensated employees.

Remember, 2% or more shareholders in a “S” Corp, LLC or Sole Proprietor cannot participate (nor can spouses and/or relatives of owners) in the company-sponsored Section 125 or Section 105 plan. This rule applies to any insurance premiums that may be pre-taxed.

If you have any questions about the compliance of your plan documents or need help implementing them, please Click Here for a free plan document review.

WRAP Documents

A WRAP Document is a document that “wraps” around the insurance policy, so that the plan sponsor maintains compliance with ERISA. All plan benefits continue to be governed by the insurance policy; however, the WRAP Document supplements the information together, so the documents are compliant with ERISA. WRAP Documents eliminate gaps between the other plans supplied by the carriers so that the employer complies with ERISA regulations applicable to Summary Plan Descriptions (SPDs).

If you have any questions about the compliance of your plan documents or need help implementing them, please Click Here for a free plan document review