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QUESTION: We are considering offering a telehealth benefit to our employees that would be separate from our major medical plan. Will this arrangement be an ERISA plan?
ANSWER: Telehealth benefits (also referred to as telemedicine benefits) are often offered under an employer’s group health plan, which is governed by ERISA if sponsored by a private sector employer. Even if telehealth benefits are offered separately from the employer’s group health plan, the benefits are likely subject to ERISA.
In general, an arrangement is an ERISA welfare benefit plan if it is a plan, fund, or program established or maintained by an employer to provide its employees with ERISA-listed benefits. Here is a summary of each element of the definition:
Plan, fund, or program. An arrangement that provides “one-off” benefits and thus does not require an “ongoing administrative scheme” might not be considered a plan, fund, or program subject to ERISA. It is difficult to imagine a telehealth benefit that would not involve ongoing administration, so this element will likely be met.
Established or maintained by an employer for its employees. You have indicated that this benefit would be offered by the company, so this element will be met.
Providing ERISA-listed benefits. Medical benefits are among the benefits listed in ERISA, and telehealth is clearly medical care, so this element will be met.
Under a DOL regulatory safe harbor, certain group insurance arrangements with minimal employer involvement may be exempt from ERISA even if they provide ERISA-listed benefits. If your arrangement is a voluntary employee-pay-all telehealth benefit offered by a third party, with employer involvement limited as set forth in the safe harbor, it would not be an ERISA plan. If it does not meet all the requirements of the safe harbor, it will be an ERISA plan and must comply with the generally applicable rules, such as having a plan administrator, claim and appeal procedures, and a summary plan description.
As a group health plan, a telehealth plan raises legal issues aside from ERISA’s applicability, including considerations under COBRA, HIPAA, and coverage mandates such as first-dollar coverage of preventive services, not imposing annual or lifetime dollar limits on essential health benefits, and parity in mental health and substance use disorder benefits. Note that telehealth-only plans meeting specified criteria have been temporarily exempt from certain of these mandates for certain plan years beginning before the end of the COVID-19 emergency.
Moreover, telehealth coverage may affect an individual’s ability to contribute to a health savings account (HSA), although temporary relief provides that telehealth and other remote care services provided on or after January 1, 2020, will not cause a loss of HSA eligibility for plan years beginning on or before December 31, 2021; for months beginning after March 31, 2022, and before January 1, 2023; and for plan years beginning after December 31, 2022, and before January 1, 2025
QUESTION: One of our employees just noticed that her 2023 pay reflects a salary reduction for DCAP benefits. Initially, she said she never elected DCAP benefits. But when we showed her the DCAP election on her election form, she responded that she had made a mistake in completing the form and asked if we could fix it. Can we do this under the IRS rules?
ANSWER: Possibly, if you conclude that (1) there is “clear and convincing evidence” that your employee made a mistake; (2) the mistake is of a type that can be corrected; and (3) the correction is appropriate. (You may need more information before you can reach these conclusions.) While IRS cafeteria plan regulations do not address election changes for mistakes, IRS officials have informally commented that an employee’s election may be undone when there is clear and convincing evidence of a mistake. Some plans use an “impossibility” approach for evaluating whether such evidence exists, while others use a “facts and circumstances” approach. When the impossibility approach is used, an election change is allowed only if the evidence indicates that it was impossible for the employee to benefit from the mistaken election. For example, you could undo your employee’s DCAP election if she has no qualifying individuals. This approach is more cautious and is easier to administer because it does not involve examining an employee’s intentions or motives.
With the facts-and-circumstances approach, mistakes may be corrected if the plan administrator can reasonably ascertain that a mistake actually occurred. (This may involve inquiry into an employee’s intentions.) When this approach is used, we suggest adopting and consistently following written guidelines that require consideration of factors such as the employee’s past elections and benefit usage (e.g., whether your employee has elected DCAP benefits in the past or has consistently used her spouse’s DCAP); plausible evidence of a clerical mistake (e.g., an employee might easily write $5,000 instead of $500, but it is less likely that $5,000 was written instead of $2,400); assessment of the employee’s truthfulness; proximity to the first payroll date after the new election is in force; and any change in the employee’s circumstances that might indicate reconsideration rather than mistake. In addition, we suggest obtaining a signed certification from the employee describing the mistake and the intended election (e.g., if she intended to elect health FSA benefits instead, the appropriate correction would be an election of such benefits). A plan might also establish a time limit for requests to correct mistaken elections.
Under either approach, if the clear and convincing standard is met, an employee’s clerical, arithmetic, and data-entry errors may be corrected retroactively. (Note that the correction may also involve correcting mistaken payroll withholding.) But mistakes as to a benefit’s scope or tax treatment generally cannot be corrected. For example, your employee could not change her election because she mistakenly believed that the DCAP provided greater tax savings than the dependent care tax credit.
To reduce the likelihood of election mistakes surfacing after the plan year has begun, many employers provide employees with written confirmation of their elections after open enrollment and before the beginning of the new plan year. Employees are instructed to review their elections and notify the employer before the plan year begins if any corrections are needed.