Author: Byrne

Recently, UBA Partner Mike Humphrey, Senior Benefits Advisor at The Wilson Agency, shared some great insights for those who are considering doing a dependent audit.  He points out three reasons why you shouldn’t do these audits and offers a much better approach to reining in costs associated with covering dependents that should no longer be on your plan.  Humphrey’s long tenure counseling large employers shows once again that sometimes quick-fix solutions for eliminating wasteful spending aren’t worth it in the end, no matter how well intended. Instead, simple changes to the up front enrollment process can avoid a lot of headaches and keep costs in line.

Here’s what he says:

Have you been considering a dependent audit and wondering if it is really worth it?

From personal experience, having done dependent audits, I can say that it is questionable.

The main idea behind a dependent audit is that it will save employers money by finding and removing all the dependents that should no longer be on the plan, for example divorced spouses or aged-out children.  These audits can be done using internal resources or, more often than not, contracted to an outside vendor who can manage all the paperwork.  Some vendors claim they save employers a lot of money through dependent audits.  But, I have a different experience and point of view that may save you the time, trouble and expense of going through an audit.

1. Costs

The reason why a company may consider a dependent audit is the belief that many of the “dependents” on the health plan are not eligible and are costing the company money.

But is the amount of money that these dependents “may” be costing the company worth the expense of a dependent audit? Maybe not for self-insured plans.

Most dependent “children” that are on the plan are not even using the plan and, in the case of marriages, an employee who wishes to keep an ex-spouse on the plan can still send in the original marriage certificate and claim they are still married.

Dependent audits aren’t cheap. The audit company gets paid a pretty penny to track employees’ compliance, look over all the documents and at the end of the day; they are the only ones that are truly benefiting from the audit.

2. Time-intensive

For large companies with thousands of employees, there are thousands of documents that must be collected and reviewed. Even if you hire a vendor to do your audit, HR will spend a lot of time dealing with employee appeals, complaints and questions. There will also be a number of unique situations that will require the vice president of HR to review, e.g., children born in other countries, common law marriages, natural disasters that have caused the loss of records, and more.

3. Employee backlash

One of the biggest issues with the dependent audit is the way employees react. Many employees are, needless to say, offended. They are being asked for documentation to prove that they were married to their wife or that a child is truly theirs. Many employees are also sensitive about releasing these private documents to a third party in this age of identity theft. In addition to the emotional aspect involved, putting together the required information and documents is a major inconvenience to employees and may have a cost to the employee when they request a new copy of their documents.

So how do you fix the problem?

The underlying issue that some ineligible dependents are on the plan will always exist, and a dependent audit is not going to fix this. Employees will continue to misunderstand who is a “dependent,” such as a grandchild living with the employee (unless the employee has legal custody).

In my 25 years of HR experience, 95% of employees are very honest people and the other 5% will find ways to beat the system. To help lessen the chance that your health plan has ineligible dependents and to not create a backlash from employees; I propose a gradual fix.

The first step is to require all new employees to present documents to HR during the new hire process; much in the same way that they must document their eligibility for the I-9 form. Secondly, tell employees that after a specific date if they have a life event, documentation will need to be presented to HR to add a dependent.  Third, be sure to code the benefits/payroll system to automatically drop dependent children from the plan once they reach 26 years of age. 

Using these steps, if just 10% of your employees turn over each year, in a few years you will have documented the eligibility of most of the dependents on the plan – and saved your company a lot of money, time, and undue stress.

(This is the third article of a three-part series. Read Part One here and Part Two here.)
By Jordan Shields, PrincipalThe SSM Group, a UBA Partner Firm in Petaluma, CA
In this blog series we’re taking a look at the unforeseen ways The Af…

Part 1 (the first article of a three-part series)
By Jordan Shields, PrincipalThe SSM Group, a UBA Partner Firm in Petaluma, CA 
No matter who you are, no matter where, the Affordable Care Act, one of the largest pieces of legislation in recent hi…

By Stephen Coffman, Group Practice Leader
The Guardian Life Insurance Company of America  

A more meaningful attempt to manage absences can go a long way toward helping ease the staffing and morale challenges of small and midsize businesses that often feel the impact of absences more acutely than larger firms. What’s more, in an environment where government oversight is only intensifying, effective absence management may become more challenging and burdensome for employers unless they have access to a specialist who understands the increasing and ever-changing federal, state and local Family and Medical Leave Act (FMLA) laws. The Americans with Disabilities Act (ADA) also needs to be considered.  For example, requirements have expanded in recent years to include reasonable accommodations designed to reduce employee stress, which can trigger absences and erode productivity.  

Small or midsize employers may not even be aware of all these issues and updates, nor have the staff to appropriately address them, which can leave companies vulnerable to lengthy and costly ligation. Plus, a growing “sandwich generation” combined with an aging population means the incidences and complexity of employee absences will only increase.  For this and many other reasons, outsourcing absence management or partnering with an expert makes a lot of sense.  But what should employers look for when evaluating their outsourcing options? Absence management programs that follow these five best practices, as revealed in the Guardian Absence Management Activity Index^SM and Study*, will generate better outcomes for companies:  

1. A full return-to-work program, starting with a written policy.
2. Detailed reporting for disability and FMLA usage patterns, costs and more.
3. A process that gives employees referrals to health management programs.
4. A central leave-reporting portal for Short Term Disability and Family and Medical leaves.
5. Using the same resource for Short Term Disability, Family and Medical leaves and other benefit programs.

Aside from helping to ensure compliance with FMLA, a more robust program approach to absence management can help shorten the duration and severity of absences and return employees to work sooner, thereby reducing health care costs and improving productivity.  It’s a win-win for both employers and their employees.

To learn more about absence management best practices and solutions, contact a Guardian Group Sales Representative. Exclusively for UBA Partners, join Guardian’s complimentary webinar “The Road to Better Absence Management” on Thursday, August 21, 2014, at 2:00 p.m. ET / 11:00 a.m. PT. Click here for participation details. If you’re not a UBA Partner and you are interested in the webinar, click here to locate your nearest Partner Firm.

*The Guardian Absence Management Activity Index^SM and Study, 2013

Generally, plans that must comply with ERISA must file a Form 5500 by the last day of the seventh month after the close of their plan year. For calendar year plans this means the due date for the Form 5500 is July 31. Government plans (which includes most public schools) generally do not need to comply with ERISA and therefore do not need to file a Form 5500. Many church plans also are exempt from this requirement.

A Form 5500 is needed for both qualified (retirement) plans and welfare (group) plans. Welfare plans include plans that provide medical, prescription drug, dental, vision, long term and short term disability, group term life insurance, health flexible spending accounts, and accidental death and dismemberment benefits. While other plans may also be considered welfare plans, these are the most common. Qualified (retirement) plans include defined benefit, profit sharing, stock bonus, money purchase, and 401(k) plans, Code section 403(b) plans covered by Title I of ERISA, and IRA plans established by an employer. Qualified plans generally must file even if they have fewer than 100 participants, although Form 5500-SF often may be filed instead of the full Form 5500. 

Welfare (group) plans generally must file the Form 5500 if:

• The plan is fully insured and it had 100 or more participants on the first day of the plan year  (dependents are not considered “participants” for this purpose unless they are covered because of a qualified medical child support order)
• The plan is self-funded and it uses a trust, no matter how many participants it has
• The plan is self-funded and it relies on the Section 125 plan exemption, if it had 100 or more participants on the first day of the plan year

In addition, beginning with the 2013 Form 5500, all plans that must file a Form M-1 must also file a Form 5500 regardless how small they are.

Beginning this year, welfare plans need to include an attachment labeled “Form M-1 Compliance Information.” There is not a question on the form for this – it is a free form attachment.  See page 18 of the Form 5500 Instructions for details. It is important to include this attachment, even if the plan does not need to file an M-1, because the Form 5500 will be considered incomplete if this section is skipped.  Generally, multiemployer (union) plans that have been in operation for less than 3 years and multiple employer welfare plans (non-union plans that cover multiple employers that are not a part of a controlled group) must file the Form M-1.

Employers may obtain an automatic 2-1/2 month extension by filing Form 5558 by the due date of the Form 5500. 

Last June, the U.S. Supreme Court ruled that a part of the Defense of Marriage Act (DOMA) that limits the definitions of “marriage” and “spouse” to opposite sex marriages and spouses is unconstitutional. Since then, the Department of Labor (DOL), the Internal Revenue Service (IRS), and the Department of Health and Human Services (HHS) have issued several notices that provide that, for purposes of federal taxes and employee benefits, a person legally married to a same-sex person in any state or foreign country is considered married even if he or she moves to a state that does not recognize same-sex marriages.

In contrast to this “state of celebration” approach, under the Family and Medical Leave Act (FMLA) an employee is considered married — or unmarried — based on the law of the state in which he or she lives when FMLA begins. The DOL has now issued a Proposed Rule that would change the FMLA definition of spouse to match the definition that is being used for other purposes — that is, if an employee who is legally married to a same-sex individual requests FMLA to care for the same-sex spouse, or the same-sex spouse’s child, FMLA would be available even if the employee lives in a state that does not recognize same-sex marriage. The federal government does not consider civil unions or legally recognized domestic partnerships as marriages, so this change would not affect employees with these arrangements.

Employers should continue to use the employee’s place of residence to determine whether FMLA should be offered until the proposed change becomes final. Comments on the proposed change may be made until August 22, 2014, so the earliest this change would be effective is sometime this fall. Employers, of course, are free to offer leave even though it is not legally required.

The DOL has issued an FAQ on the proposed rule that employers may find helpful.

For further information including best practices in FMLA, attend UBA’s webinar, “Curbing FMLA Abuse,” on Thursday, July 10, 2014, at 2:00 p.m. ET / 11:00 a.m. PT. Go to http://bit.ly/1pJqIfR and enter code UNUMUBA for a $149 discount.