Summer Slowdown?

Some may recall long-time employees who lamented that the summer was no longer a time when things slowed down. I do not ever recall the summer slowdown. In the world of employee benefits, summer is when things begin to heat up (pun intended). Employers are getting ready for renewals and open enrollment in the fall, plus all the filing and reporting obligations for calendar year plans all seem to hit just when we want to leave on summer vacation. But before you go, here are a few compliance reminders. 

Most employers rely on carriers and other vendors to comply with ERISA and other laws. However, even if those vendors take on the administrative obligations on behalf of the employers, the employers are still ultimately responsible for the requirements. Therefore, employers need to be vigilant with respect to their vendors and monitor their activities on behalf of the employers and employee plan. 

World Compliance Calendar

Every employer plan has multiple deadlines (See the WIA Compliance Calendar here). The link has the complete WIA Compliance Calendar, which we recommend for your ongoing use. The specifics before you head to the beach are summarized below:

CAA – Rx Cost Reporting – Due June 1 for all medical plans regardless of plan year.  

As part of the Consolidated Appropriations Act, 2021 (CAA), there is a new obligation (referred to as RxDC) on insurance companies and self-funded employer-sponsored health plans (fully insured employer plans can rely on the insurance carriers) to report information about prescription drug costs and healthcare spending to the Centers for Medicare & Medicaid Services (CMS). The reporting must be done directly on the CMS website. Although the due date has passed, many commentators feel that a delinquent filing is preferable to not filing. 

PCORI Filing – Form 720 – Due July 31 for all plans regardless of plan year.

Rising from the dead in 2019 and reauthorized through 2029, the Patient Centered Outcomes Research Institute (PCORI) is funded by a small assessment for each covered individual on health insurance and self-funded employer health plans. Fully insured plans can rely on the insurers to file Form 720 and pay the associated fee. Self-funded plans must file and pay the fee by July 31 each year.  

The calculation can be complicated, but it taps out at $3.00 (as adjusted) per covered individual, so the stakes are quite small. See the WIA blog on this topic here.  

Form 5500 – Due on the last day of the 7th month following the end of the plan year – July 31 for most plans.

Employer-sponsored benefit plans covered by ERISA with 100 or more participants must file a Form 5500 with the Department of Labor each year. Calendar year plans must do so by July 31 of each year but can obtain an automatic extension until 2 ½ months later (October 16, 2023) by filing form 5558 by the due date of the 5500.  

Medical Loss Ratio Rebates – Expected by September 30 

Employers with fully insured plans can expect Medical Loss Ratio (MLR) rebates, if any, by September 30 each year. Since the MLR can be a plan asset, employers need to make that determination and decide how they will treat the MLR if one is generated. 

We are often asked about the MLR and whether and how it must be shared with plan participants, i.e., the employees. Often the question is generated because the amounts can be relatively small, and it seems like more administrative nuisance than it is worth. While that can be the case, there are some factors for employers to consider.   

The best practice, from an ERISA and fiduciary standpoint, would be to refund, in cash, the proportion of the MLR that would match the percentage of the premiums paid by employee contributions and to return those funds to the employees who generated the MLR. For example, if the MLR is for 2022 premiums and employees paid 20% of the premium in 2022, the employer would send 20% of any MLR to each employee who paid the premiums, and for the period the employee paid the premium. Employers with high turnover (and even many with stable populations) find that unattractive. Employers do not want to track down and send checks to former employees or even break up the payment to current employees. Other options include premium holidays for current plan participants and using the MLR to pay plan administrative expenses. 

Some employers skirt those issues by taking steps to avoid the characterization of the MLR as plan assets. Doing so generally involves communicating a flat cost for the employee portion of the premiums (vs. a percentage breakdown) and communicating that the employer bears any additional costs. That generally permits the employer to retain an MLR rebate as the employees have a fixed cost. The DOL has not endorsed this characterization, but it does follow the ERISA regulations.

Medicare Part D – Creditable Coverage Notices (if not part of annual Open Enrollment)

If plan provides prescription drug coverage

Send Medicare Part D notices of Creditable Coverage to eligible individuals by October 31 unless included in Open Enrollment information.  

Open Enrollment Preparation 

Determine notices that will be included in Open Enrollment Packets 

Many annual notices are required to be sent to all health plan enrollees. Others, such as the Medicare Part D creditable coverage notices, are not required to be included but often are so that the obligation for their distribution is automatically met. Employers should consider which they want to include beyond the mandated requirements.

(See the Annual Compliance Calendar for more information).

Conclusion

There remain some outstanding obligations that all plans need to complete in the third quarter. In addition, there are some details to consider prior to open enrollment. Taking some time currently will provide a cushion for making critical decisions before the real crunch hits in the fall.

This Article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.