Medicare entitlement (entitlement=eligible & enroll) is no longer automatic for everyone when they turn 65, rather most will need to sign up to get Medicare Part A and Part B. Medicare is only automatic for individuals who:
Are getting benefits from Social Security or the Railroad Retirement Board (RRB) at least 4 months before they turn 65
Are under age 65 and have disability benefits from Social Security or RRB for 24 months
Have ALS (also called Lou Gehrig’s Disease)
Therefore turning 65 and gaining eligibility for Medicare in and of itself, does not disqualify an employee from continuing to receive employer contributions or making their own contributions to an HSA. Only if one voluntarily enrolls in any part of Medicare would they then be disqualified.
Employees wanting to work a few more years and delay retirement can continue to reap the triple tax advantage benefit of an HSA if they are otherwise an eligible individual. Keep in mind however if an employee delays their enrollment in Medicare and continues to work beyond age 65, once the individual’s employment sponsored coverage ends, they have an eight-month special enrollment period to sign up for Medicare Part A. The first month of Medicare entitlement may be retroactive to the month they turned 65, or up to 6 months prior to enrollment, whichever is less. Therefore, an individual may become ineligible for an HSA & have to stop HSA contributions for up to 6 months before they apply for Medicare Part A benefits to ensure they do not over contribute to their HSA.
If you have a question on this or are stumped on another employee benefits compliance question, send us an email today! We’re here to explain complex compliance issues in layman’s terms.
The Compliance Rundown is not a law firm and cannot dispense legal advice. Anything contained in this post or on their website is not and should not be construed as legal advice. If you need legal advice, please contact your legal counsel.
EBSA, a division of the DOL responsible for ensuring the integrity of nearly 722,000 retirement plans, approximately 2.5 million health plans, and a similar number of other welfare benefit plans, such as those providing life or disability insurance in the United States, closed 1,122 civil investigations with 754 of those cases (67%) resulting in monetary results for plans or other corrective action in Fiscal Year 2020. EBSA recovered:
• over $3.1 billion in direct payment to plans, participants and beneficiaries • 456.3 million in connection with 171,863 “complaints” with an employee benefit plan by an individual
The risk is real! It is not a matter of “if” but “when” you get audited! In today’s information age, the government agencies easily share information too, so a “complaint” and investigation by one entity could lead to an audit by another. There are no “absolutes”.
What is your risk tolerance?
3 Tips for Proactive Employee Benefits Compliance
Tip #1 – Maintain written plan documents for every employee benefit plan.
If you are ever selected for a DOL audit, it is important to have documents showing you are complying with ERISA and that you are maintaining these documents. This may not only reduce your exposure to penalties but also make the audit process more manageable and less time-consuming.
Plan documents are the foundation of any ERISA plan that you sponsor (i.e., all employer-sponsored plans, except churches and governments). ERISA requires that every employee benefit plan have a written plan document that describes the benefit structure and guides the plan’s day-to-day operations.
Documents from the carrier are not usually ERISA plan documents. Carriers are not subject to ERISA. Their documents may have about 80% of what ERISA requires but typically are missing critical information (e.g., plan #, named fiduciary, ERISA discretionary authority language). So, plan sponsors (e.g., employers) need to do something on top of the carrier documents.
Tip #2 – Establish formal process for providing required ERISA documents to plan participants and beneficiaries.
ERISA has two primary requirements and satisfying both requirements fall on the plan administrator (typically the employer). In addition to the plan document requirement mentioned above, ERISA also requires that plan participants and beneficiaries receive specific documents at certain times of the year. For instance:
Summary Plan Description – upon enrollment and at various other times, providing information the participant may rely on about the plan’s terms, including who is eligible and what the benefits are.
Summary of Benefits and Coverage (SBC) – upon enrollment and within 7 days upon request
Marketplace Coverage Notice – within 14 days of employee’s start date
Children’s Health Insurance Program Reauthorization Act (CHIPRA) – on the first day of each plan year, to all employees who reside in a state which medical premium assistance is available, regardless of the employer’s location, and at the time of initial enrollment.
There are potential penalties associated with not providing the document when required. Employers should keep a record of when these documents are provided, to whom and how. The DOL during an audit is likely to ask for proof of the required participant communications.
Tip #3 – Have a formal document retention policy.
ERISA generally requires employee benefit plan documents to be retained at a minimum of six years after the plan’s Form 5500 filing due date. (Employers who do not have a Form 5500 filing obligation also must maintain the documents for six years after the date a Form 5500 would have been filed if it were not for an exemption.)
Documents that should be retained include but not limited to:
Original signed plan documents and amendments
Corporate resolutions and/or committee actions related to the plan
Plan disclosures and communications to participants (including Summary Plan Descriptions and Summary of Material Modifications) –notices, open enrollment guides
Financial reports, audits, and related statements
Form 5500s
Trust documents
Nondiscrimination and coverage testing results
Disputed claim records in the event of future litigation
Payroll and census data used to determine eligibility and contributions
Best practice is to maintain these documents for the life of the plan, providing a paper trail of the plan from its beginning.
Bonus Tip: Do not let your first audit be with the DOL!
Plan sponsors on a regular basis should complete an internal compliance audit or “check-up” of their employee benefit plans for compliance with ERISA and other legal requirements. The check-up can uncover areas that an employer should be doing differently or need to be changing prospectively, making the DOL audit process more manageable and less time consuming.
Regardless of how sound your business practices are, every organization should be prepared for a DOL audit.
The Compliance Rundown is not a law firm and cannot dispense legal advice. Anything contained in this post or on their website is not and should not be construed as legal advice. If you need legal advice, please contact your legal counsel.
There are 21 FAQs in the DOL’s guidance released on April 7, 2021 providing clarification on the COBRA subsidy added by the American Recue Plan Act of 2021 (ARPA). Generally, when we think of COBRA, the focus is on federal COBRA laws, that are typically applicable to private sector employers subject to ERISA with twenty or more employees and governmental plans. State continuation, or ‘mini-COBRA” laws have been adopted by over 40 states and often fill in gaps where the Federal COBRA laws do not apply or extends coverage after Federal COBRA has been exhausted.
The COBRA subsidies under ARPA are also available to Assistance Eligible Individuals (AEIs*) enrolled in a state continuation program; however, ARPA does not change any state program requirements or time periods for election of state continuation. This means there are important differences on how the subsidies work for health plans only subject to state continuation (e.g., church plans or employer plans when the employer has less than 20 employees).
It does not add a Notice requirement for States if the State does not have a notice requirement now. The general notice, second election notice and subsidy expiration notice requirements are only applicable to federal COBRA plans. The DOL did provide a model alternative notice to satisfy mini-COBRA subsidy notice requirements.
If the state’s mini-COBRA laws do not provide continuation coverage due to a reduction in hours, an AEI is not eligible for a subsidy if they lost coverage because their hours were reduced.
Individuals must elect to receive state continuation within the state’s required original election time period, unless the state issues guidance permitting a second election period. The section of ARPA that provides for the second election period references ERISA, the Internal Revenue Code, and the Public Health Service Act—but does not explicitly address state law programs.
*AEIs are those whose involuntary termination or reduction in hours occurred:
During the subsidy period (4/1/2021 – 9/30/2021)
Prior to the subsidy period but they have existing COBRA coverage extending into the subsidy period
Prior to the subsidy period and have not elected COBRA. But if they had elected, coverage would have extended into the subsidy period.
Includes those who elected and subsequently dropped COBRA coverage before the subsidy period begins.
If you have any questions regarding the COBRA subsidy guidance, contact: questions@thecompliancerundown.com
The Compliance Rundown is not a law firm and cannot dispense legal advice. Anything contained in this post or on their website is not and should not be construed as legal advice. If you need legal advice, please contact your legal counsel.
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