Bi-Monthly Newsletter

1. A Bi-monthly publication from The Gardner Group April 2012
Benefit Compliances
W-2 Health Care Non-Discrimination Testing
Value Reporting With the healthcare reform in full swing, we wanted to draw attention to a
compliance item that may not be thought of very often, Section 125
Requirement
compliance (non-discrimination testing).
Is Non-Discrimination Testing required for all POP groups? And does the
size of the group have any bearing on whether testing is required?
While the health care
reform law requirement The answer to the first question is yes, and the answer to the second
forcing employers to question is no. Discrimination testing is required for POP groups of all
calculate and report the sizes. In fact, testing is even more critical for smaller groups.
aggregate cost of
employer-sponsored Non-Discrimination testing is required by the IRS to ensure that a group's
health coverage on W-2 cafeteria plan does not favor Highly Compensated Employees (HCEs)* or
forms was optional last year, employers must be Key Employees*. Specifically, there are three basic components to the
prepared to comply in 2012. testing:
For purposes of the reporting requirement, • The Eligibility Test determines whether the plan is broadly offered to
applicable employer-sponsored coverage includes non-HCEs along with HCEs.
coverage under any group health plan made • The Contributions and Benefits Test determines not only whether
available to an employee by the employer, plan benefits are available to non-HCEs on the same or similar terms
regardless of whether the employer or the employee as HCEs, but may also reveal whether HCEs are in practice receiving
paid the cost. more of the benefit than non-HCEs.
• As its name implies, the Key Employee Concentration Test has to do
Below are some provisions to the law that have
with Key Employees rather than HCEs. This test determines whether
recently been clarified by the IRS in Notice 2012-9.
such Key Employees receive more than 25% of the total benefits
• Businesses with fewer than 250 W-2 forms for the under the plan.
preceding calendar year are not required to report
the aggregate cost of coverage in 2012. For smaller groups (especially those with five employees or less), the ratio
• Since the standard for determining whether the of HCEs participating in the pre-tax plan versus Non-HCEs is often higher.
cost of coverage under a dental or vision plan In addition, Key Employees are often
must be included is the same as that which compensated more and therefore
determines whether such coverage is an excepted tend to purchase more benefits than
benefit under HIPAA, certain stand-alone dental do non-Key Employees (e.g. family
and vision plans may be exempt from the medical coverage versus employee-
reporting requirement. only medical coverage). Either of
• The value of on-site medical clinics and employee these scenarios, in practice, may
assistance programs must also be taken into more easily result in the failure of
account unless the employer does not charge a Non-discrimination testing for
premium for an EAP, wellness program or on-site smaller groups.
medical clinic to COBRA-qualifying beneficiaries. What happens if the plan fails?
The IRS has stated the applicable employer- If a plan fails non-discrimination testing, all is not lost: the plan is not
sponsored coverage does not include: disqualified. However, HCEs and Key Employees can lose their tax-favored
status. Specifically, HCEs and Key Employees who have had salary
• Contributions to an Archer medical savings reductions will be taxed on the amount of those salary reductions. The
account (MSA), health savings account (HSA), employer should also treat those amounts as taxable income for the
and salary reductions into a medical flexible purposes of wage reporting on Form W-2 and for purposes of income tax,
savings account (FSA). Employer flex credits to a FICA, and FUTA withholding. Finally, these individuals will likely need to
medical FSA are reportable; contribute to their benefits on a post-tax basis until their participation in
• Coverage under an employee assistance the plan would no longer cause a failure.
program (EAP), wellness program or on-site
medical clinic, provided that the employer does How often should testing be conducted?
not charge a premium with respect to that type The IRS stipulates that testing should be conducted at least once per year.
of coverage provided under COBRA; However, if a plan fails testing, corrections cannot be made after the end
• Coverage only for a specific disease (if it of the cafeteria plan year. Therefore, best practices dictate that the test
qualifies as a “HIPAA-excepted” benefit and is should be conducted during the year so that any adjustments can be made
paid for on an after-tax basis by the employee); prior to year-end.
• Coverage for long-term care;
• Coverage only for accident insurance; *An HCE is any of the following: An officer of the employer; A person owning more than
5% of the employer entity at any point during the current or preceding plan year; A
• Hospital indemnity or other fixed indemnity person who earned more than $110,000 in 2011 (or will earn more than $115,000 in
insurance (If it qualifies as a “HIPAA-excepted” 2012).
benefit, if the employer makes no contribution
*A Key Employee is any of the following: An officer with annual compensation greater
to the cost of coverage that is excludable from than $160,000 in 2011 (or will earn more than $165,000 in 2012); A person with
an employee’s gross income, and if the ownership of more-than-5% of the employer entity; A person with ownership of more
premium is paid for on an after-tax basis by the than 1% of the employer entity with an annual compensation over $150,000.
employee)
Resource: Ameriflex Connect
-Resource: ACS Benefit Services

2. April 2012
April is Stress Summary of Benefits and Coverage
Awareness Month Fact Sheet
This April marks the 20th anniversary of Stress Employers have a new health care reform deadline to add to their
Awareness Month. calendars. Originally, all health insurance issuers and group health plans
Stress is a silent and deadly epidemic, yet many would have had to provide employees with the Summary of Benefits
people have come to accept that it’s just a and Coverage to employees beginning March 23, 2012. However, the
normal part of their everyday lives. The final regulations have changed the applicability date to plan/policy years
American Institute of Stress estimates that 75 - and open enrollments beginning on or after September 23, 2012.
90 percent of all visits to primary care The purpose of the Summary of Benefits Coverage (SBC) is to provide
physicians are for stress related problems. The individuals enrolling in medical coverage with standard information so
American Psychological Association reports they can compare medical plans as they make decisions about which
77% of people regularly feel the physical plan to choose.
symptoms caused by stress, such as fatigue,
headaches, upset stomach, irritability and Who is Responsible for Providing the Information?
moodiness. Stress has also been directly linked For fully insured plans and HMOs, the insurer and the employer are
to cancer, diabetes, depression, anxiety responsible for producing and distributing the summaries. For self-
disorders, insured plans, the responsibility lies with the employer.
seizures, asthma,
heart disease and Information may be provided in either paper or electronic format. If a
stroke. SBC is provided electronically to currently enrolled employees, the plan
must comply with the ERISA rules for electronic delivery. For employees
Try these tips to not yet enrolled in the plan, the SBC may be provided electronically via
cope better with email or Internet posting:
stress in your life-
at work and at home. • If posted on the internet, display the SBC in a location that is
prominent and readily accessible; notify each individual that the
Adjust your attitude information is available, where they can access it, and that a
According to research, people cope better paper copy is available upon request.
when they: • Promptly provide a paper copy upon request.
 View stressful situations as challenges, not
threats What is the Required Timing for Distribution to Employees?
 Control how they respond An SBC must be provided when an employee requests information
 Eat healthfully, think positively and about a plan, applies for coverage or enrolls in a plan.
maintain relationships with people they If any benefit changes are made before the coverage becomes effective,
care about an updated SBC must be provided.
Learn to problem solve
• An SBC must be provided within 60 days after an individual
The key, experts say, is to think through
enrolls due to a special enrollment event.
difficult situations:
• During annual enrollment, an individual must receive a SBC for
 Break problems into smaller pieces, this
the plan in which he or she is enrolled. Summaries for other
makes them less overwhelming
available plans must be provided upon request.
 Focus on problems that really need
• Upon request from the employee, a SBC must be provided
attention, ignore the rest
within 7 business days.
 Be flexible and realistic about your choices
Communicate 60 Day Notice for Material Modifications
Keeping troubles inside adds to stress, instead: If any material change is made to a plan during the plan year that is not
 Find someone to talk to about your reflected in the most recent SBC, a notice must be provided at least 60
worries days before the effective date of the change. A material change is any
 If you have a medical condition, join a change that would be considered by an average participant to be an
support group important enhancement or reduction in benefits. This timing applies
only to changes that become effective during the plan year. Changes
Many people find that volunteering for a made at annual enrollment do not require 60 day advance notice.
worthy cause helps them forget about their
problems and increases their self –esteem. Samples and instructions may be viewed at the DOL’s website:
www.dol.gov/ebsa/healthreform .
Source: Aetna
Source: CIGNA
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