Insurance Perspective

Submitted by: Starkweather & Shepley Insurance Brokerage, Inc.

Common Employer Benefits Mistakes

Have you faced any of these common issues?

We thought it might be helpful to share a few of the common mistakes we see some organizations making in the employee benefits arena. They are usually based on a misunderstanding of the circumstances of the situation. Once reviewed in more detail, a different course of action is appropriate. By reviewing these here, we will be able to assist our clients, before they make these common mistakes.

Many times employers are not completely clear on all of the circumstances when it is appropriate to offer COBRA. For instance, some employers do not offer COBRA upon loss of eligibility. This occurs most frequently when an employee is out on leave. If an employee is out on an extended leave that is not protected by FMLA, they are typically not eligible for benefits under the eligibility rules of the plan. Employers should review their plan documents to be sure it defines when eligibility is lost, then apply those rules to the situation.

Some employers do not realize that the ADA, STD, LTD, and Worker’s Compensation, do not require an employer to continue to provide health insurance. Employers sometimes extend coverage beyond the plan’s loss of eligibility date. Frequently, employers are trying to “be nice” and extend the leave. But going on a leave (not protected by FMLA), or failing to return from an FMLA-protected leave, falls under the COBRA qualifying event of “reduction in hours.” Therefore, COBRA should be offered when eligibility is actually lost, upon the reduction in hours. Extending the coverage beyond the plan’s actual eligibility date puts the employer at risk of the carrier not paying the incurred claims. As an alternative, employers could offer to pay for COBRA coverage for a period of time. (Note: There is an exception if an employer is using the look-back measurement period and the employee has qualified for a stability period.)

There is another COBRA related mistake that is commonly made: offering COBRA upon Medicare entitlement. Under the Medicare Secondary Payer Rules (MSP), an active employee’s Medicare entitlement or eligibility does not normally cause loss of plan eligibility due to MSP rules. Employers cannot condition eligibility on Medicare entitlement. The problem is that the employee might drop employer coverage voluntarily when entitled to Medicontinued on page 53

Insurance Perspective continued from page 51 care. This does not trigger COBRA for spouse and dependents. To continue coverage for the spouse or dependents, the employee would have to remain enrolled in the group health coverage and Medicare. The employer’s plan would be primary.

The third mistake we frequently see, and remind our clients about, is that some employers with a fully insured medical plan and an HRA, forget that they must pay the PCORI fee on their HRA plan. As you probably know, self-funded employers are responsible for the PCORI fee for their health plan and the HRA, each unique life is only counted once, by July 31 each year. For the fully insured plan, the PCORI fee is paid by the insurance carrier. But the HRA associated with the fully insured plan is also subject to the fee. Employers will pay the fee only for the participant and not for dependents.

A final mistake we hear employers ask about frequently is how to determine Wellness Incentive Affordability. There is a lot of confusion about how to do this correctly for Affordability for the ACA 4980H purposes. Unless the wellness rate is based on tobacco, it is necessary to use the (higher) non-wellness rate to determine affordability. For example, in a situation where the wellness incentive is not tobacco related, let’s say the regular required monthly employee contribution is $250 per month. The potential wellness incentive (NOT based on tobacco) reduces the contribution to $150 per month. For purposes of affordability, we must use the $250 contribution to measure, and it cannot exceed 9.83% of the employee’s household income for 2021. Therefore for Employer Reporting, $250 should be entered on Line 15 of Form 1095-C, regardless of whether the individual satisfies the wellness program requirements or not.

However, if the Wellness Incentive is tobacco-related, it is treated differently. If the required monthly contribution is $250 per month, but the potential wellness

incentive is tobacco related, and reduces the employee contribution to $150 per month, we would use the $150 contribution to measure affordability. For Employer Reporting, $150 would be entered on Line 15 of Form 1095-C, regardless of whether the individual is a tobacco user or not. We hope you find these examples helpful to prevent you from making some common employer mistakes. Employee Benefits can be extremely confusing nowadays, with all the detailed requirements based on well–intended legislation. Many employers seek assistance to be sure they are understanding the requirements thoroughly and acting in compliance. Boston Area Written by Joan Greenwell, VP, Employee Benefits Locations Practice Leader Starkweather Benefits Solutions. n 2 Dexter Street Bo Eve st re on tt, Area MA 02149 Boston Area Locat431 Sec ionsond Street Locations 2 Dexte Everett r , Street MA 021 2 49 Dexter Street Everett, MA 021 Eve49 rett, MA 02149 431 Second Stre 43et 1 Second Street Everett, MA 021 Eve49 rett, MA 02149

BOSTON AREA LOCATIONS 2 Dexter Street Everett, MA 02149

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