One of the busiest times of year for an employee benefits professional is open enrollment. It is a crucial and yet stressful time of year that typically results in numerous employee questions and complaints and is a time of year with high potential for both employer and employee mistakes. Despite the stress and potential for problems, open enrollment provides an opportunity for a company to set itself up for success for the following year.
The Employee Retirement Income Security Act (ERISA) does not require an annual opportunity for employees to change benefit plan elections. However, because of compliance issues that can spring from not offering a regular enrollment period, most companies choose to offer an “open enrollment” period, usually taking place in mid- to late fall for calendar-year health and welfare benefit plans.
Employee attention to employer communications during this period is often high, and attention to detail in participant communications behooves an employer during this period. Well-written and timely notices may be relied upon to satisfy many compliance obligations. Inaccurate or incomplete open enrollment materials, however, can create employee confusion and result in legal liability under the complex network of federal laws governing employer-sponsored benefit programs.
Below is a sampling of key issues to consider to help you avoid compliance missteps during this year’s open enrollment period.
1. Plan design changes
If you change your plan design (for example, adding a high deductible health plan option and health savings account (HSA) or adding a healthcare flexible spending account (FSA) carryover, etc.), you should carefully review all language describing the changes and consider how it will impact other coverage. Accuracy and clear communication are key to foreclose future benefit claims and litigation. We also recommend checking with a trusted advisor and/or legal counsel if any of the plan design changes will require plan amendments and/or updated summary plan descriptions.
2. Voluntary benefits
If you offer “voluntary” benefits that are intended to be exempt from ERISA, pay close attention to how these voluntary benefits are described and endorsed and what administrative tasks you are performing for these benefits. A misstep risks tripping the voluntary plan safe harbor and subjecting these plans to one or more of ERISA, COBRA, HIPAA, and other compliance mandates.
3. Health reform information reporting
As a check-in, ensure your enrollment vendor is able to provide records of employees that waived and enrolled in group medical benefits. This could become critical when tracking offers of coverage when filings Forms 1094 and 1095 to satisfy health reform’s information reporting requirements each spring. Open enrollment is also a good time to check in with your information reporting vendor to prepare for compliance with the filings for the upcoming spring. You should review your systems now to ensure they are capturing the necessary information to be reported to the Internal Revenue Service (“IRS”) for all participant groups. It is also a good idea to look back at any correspondence you received from the IRS regarding prior year reporting and confirm that any noted issues are being addressed.
4. Privacy protections
Enrollment data is often protected health information (“PHI”) under HIPAA. Therefore, you should confirm as necessary that (1) a business associate agreement (“BAA”) is in place with all vendors that handle PHI, and (2) enrollment data that is PHI is not shared outside of the plan (yes, even with your colleagues) in a manner that could conflict with HIPAA mandates.
5. Review communications
Carefully review all language in open enrollment materials, which are rife with potential problems. Issues arise, for example, when an employee reads inconsistent descriptions and dates across different open enrollment communications and when it is not clear which benefits require affirmative election each year. Open enrollment materials should also avoid language promising future benefits and include legal notices and disclaimers when necessary (such as the wellness plan notice of reasonable alternative standard). Another important disclaimer you should consider including is a reservation of rights clause describing the employer’s right to amend and/or terminate the plan or any benefit offerings thereunder at any time.
6. Annual legal notices
Many notices are required on an annual basis, such as the HIPAA Notice of Special Enrollment Rights and Children’s Health Insurance Program (“CHIP”) Notice. It can be easy to miss a notice or two and you should confirm each year that all required annual legal notices are included and properly distributed.
7. Eligible groups
Enrollment materials typically need to go to a larger group than just your active employees. You should review your open enrollment distribution list to ensure that materials are appropriately communicated to all eligible individuals—including, for example, COBRA qualified beneficiaries and alternate recipients under a QMCSO.
More ways to prepare for open enrollment:
- Technology helping Americans feel more prepared for open enrollment
- 2018 open enrollment trends: Staying ahead of the curve
- 5 things small business owners should know about this year’s open enrollment
Megan Mardy is a partner and Jacob M. Mattinson and Emily Rickard are associates with McDermott Will & Emery. Mardy advises companies on a wide variety of health and welfare and retirement benefits issues. Mattinson focuses his practice on employee benefits and matters related to 401(k), 403(b), pension, executive compensation, health care reform, and cafeteria and welfare plans. Rickard focuses her practice on executive compensation and employee benefits, and has devoted a substantial portion of her practice to assisting employers in implementing and maintaining employee stock ownership plans (ESOPs).