Year-End Compliance Checklist

Dec
15

Year end complianceIt’s that time of year again—time to cleanup and close-out the 2014 plan year for your ERISA health and retirement plans. The following is an overview of a few compliance items that should be addressed before the close of 2014.

Group Health Plans

This past year was a big year for health plans. With all the changes associated with the Affordable Care Act (“ACA”) and some big announcements by the IRS and the Supreme Court, there are several new items to add to our year-end checklists. Here are a few of the highlights:

  • Health Flexible Spending Accounts.  The IRS recently announced that the health flexible spending arrangement (“Health FSA”) limit for 2015 was increased to $2,550. Additionally, as announced last year, Health FSAs continue to be permitted to offer limited rollovers of up to $500.
  • New COBRA Notices.  COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act, requires group health plans to provide qualified beneficiaries with an election notice that describes their rights to continuation coverage and how to make an election. The election notice must be provided to these individuals within 14 days of the date the plan administrator receives the notice of a qualifying event. The Department of Labor (“DOL”) recently issued new model COBRA notices that reference the ACA Marketplaces (or “exchanges”). Accordingly, employers should modify their COBRA notices and include this new language going forward.
  • Health Reimbursement Arrangements.  The IRS continues to maintain that certain health reimbursement arrangements which operate independently of group health plans must be re-designed or terminated by January 1, 2014. Employers providing reimbursement for individual health insurance policies or other medical care should review their plan design to ensure the arrangement remains permissible.
  • DOMA.  On June 26, 2013, the Supreme Court of the United States ruled in the well-publicized United States v. Windsor that Section 3 of the Defense of Marriage Act (“DOMA”) was unconstitutional. As a result, the IRS and the DOL declared that employee benefit plans must now treat same-sex spouses in the same manner as opposite-sex spouses. To this end, plan sponsors should review the plan documents and gather information to determine the impact of this guidance. Specifically, plans should update eligibility provisions, adjust imputed income practices and review plan definitions of “spouse” to ensure compliance before year end.
  • HIPAA.  In January 2013, the government released final HIPAA regulations which became effective September 23, 2013. Sponsors of group health plans should review and update their plan’s HIPAA materials as necessary to ensure compliance with the new regulations. This review should include the plan’s HIPAA Privacy Notice, Business Associate Agreements and HIPAA Privacy Policies.

Sponsors of group health plans should continue focus their efforts on getting ready for the full onset of the ACA’s employer mandate. Under the mandate, large employers will be subject to significant penalties if they fail to offer health coverage or fail to offer sufficient health coverage to their full-time employees. Employers should have measurement periods in place and should continue to examine their workforce, particularly part-time and/or seasonal employees, in order to finalize their health care reform strategies for 2015.

Retirement Plans

Although the ACA has dominated the employee benefits news this past year, plan sponsors of retirement plans are equally affected by the Supreme Court’s ruling on DOMA. Additionally, retirement plans are subject to a variety of annual disclosure obligations. Here are a few of the year-end compliance highlights:

  • Safe Harbor 401(k) Plans.  Plan sponsors of safe harbor 401(k) plans must provide all participants an annual notice describing the employer’s safe harbor contributions. This notice must be provided to participants at least 30 days (but not more than 90 days) before the first day of the plan year. For most plans, the notice was due December 1, 2014.
  • Automatic Enrollment Features.  Plans that automatically enroll participants are required to provide participants with an annual notice describing the plan’s enrollment and contribution features. This notice must be provided to participants at least 30 days (but not more than 90 days) before the first day of the plan year. For most plans, the notice was due December 1, 2014.
  • Funding Notice for Defined Benefit Plans.  Defined benefit plans are required to provide participants with a funding notice summarizing the plan’s assets and liabilities, its funding status for the previous two years and certain other information. The notices are due no later than 120 days after the close of the plan year. For most large plans, the notice must be provided by April 30, 2015.
  • Qualified Default Investment.  Where participants are allowed to direct their own investments, defined contribution plans are allowed to select a “qualified default investment” in which participants’ assets will be invested if the participant does not select an investment option. The plan sponsor must give participants notice of the plan’s qualified default investment. This notice must be provided to participants at least 30 days (but not more than 90 days) before the first day of the plan year. For most plans, the notice was due December 1, 2014.
  • DOMA.  Pursuant to the Supreme Court ruling and guidance from the IRS, same-sex spouses must be treated as lawful spouses for purposes of maximum benefit limitations, spousal consent rules, rollovers, death benefits, minimum required distributions, availability of in-service hardship withdrawals and assignment of benefits under qualified domestic relations orders. At a minimum, plan sponsors should review the plan documents, policies and procedures to determine whether additional amendments are needed to reflect these changes.

Complying with the IRS and the DOL notice requirements is an important part of the plan administration process. Furthermore, penalties for noncompliance can be significant. Penalties for noncompliance generally begin at $100 per day per affected participant or beneficiary.

Compliance Assistance

We understand this is a busy time of year for many of our clients and that it’s easy to overlook small details. If you have any questions regarding the above items or have any related compliance questions, be sure to contact your McGrath North attorney.

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