ERISA & Affordable Care Act Compliance to California Clients

Why is it important for your business to be compliant with ERISA and the Affordable Care Act?

Compliance with both ERISA and the Affordable Care Act (ACA) are two requirements that cannot be ignored. Failure to comply with either law can result in significant fines for both small and large companies alike.

What is ERISA?

ERISA stands for the Employee Retirement Income Security Act, and was passed in 1974 to set minimum standards for health, life, disability and other welfare benefit plans. ERISA establishes mandates that plans must follow, protecting the retirement assets of Americans, as well as establishing protection for employees enrolled in other health plans. It essentially establishes a set of rules governing the benefits employers choose to offer. The Department of Labor (DOL), the Employee Benefits Security Administration (EBSA) and the Department of Treasury collectively administer and enforce the law. The Health Insurance Portability and Accountability Act (HIPAA) of 1996, and the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 also fall under the umbrella of ERISA.

Who must abide by ERISA?

Corporations, partnerships, sole proprietorships, and non-profit organizations must abide by ERISA. Once these organizations offer a health, life, disability or protected plan, that plan is subject to ERISA. Governmental employers and churches are exempt from the law.

What must employers do to abide by ERISA?

There are several provisions mandated under ERISA, such as, but not limited to, conduct, reporting, accountability, disclosures and procedural safeguards. An important provision that is often overlooked is the disclosure requirement, which is in reference to medical, dental, vision, disability and life insurance plans. It states that all employers offering these types of plans, regardless of size, must provide all beneficiaries (employees enrolled in the plans) with a Summary Plan Description (SPD); a document that clearly lists the benefits being offered, the rules for obtaining those benefits, the plan’s limitations and/or exclusions, and other guidelines for utilizing benefits such as obtaining referrals for specialist visits or surgery. The Evidence of Coverage booklets provided by the insurance carriers generally do not meet these requirements, and the employer is out of compliance if an SPD is not accessible to all enrolled employees.

Garnett-Powers & Associates (GPA) develops SPDs for all their clients to assure every company is compliant with the law. In addition, if there are questions regarding other parts of ERISA such as COBRA, GPA makes certain that the correct answer and any necessary documentation is provided.

What is the Affordable Care Act (ACA)?

The ACA (also known as the Patient Protection and Affordable Care Act or ‘Obamacare’) is a United States Federal Statute that was signed into law on March 23rd, 2010, requiring that all U.S. citizens have medical insurance or pay a penalty. The primary intent of the law was to ensure that United States citizens and legal immigrants who were previously uninsured would have access to affordable medical insurance coverage, either through the federal or state marketplaces (exchanges) or through the expansion of Medicaid, depending on the state. The affordability was enhanced by the availability of subsidies, also known as premium tax credits, which could be accessed by households with incomes between 100% and 400% of the federal poverty level.

Who must abide by the ACA?

All U.S. citizens must abide by the ACA by proving they have had continuous coverage through either an individual policy, their employer’s policy or by Medicaid/Medical. In addition, the ACA includes an “employer mandate” that requires all businesses with 50 or more full-time equivalent (FTE) employees provide affordable health insurance to at least 95% of their full-time employees, and dependents up to age 26, or pay a penalty. The medical insurance plan offered must meet the definition of minimal essential coverage (MEC), as well as pass the test for cost-sharing requirements related to deductibles, copays and co-insurance.

What must employers do to abide by the ACA?

Employers with fewer than 50 FTEs have no mandates to fulfill regarding the ACA, other than to assure that insurance carriers offering medical plans to their employees provide the employees with a form 1095, which describes their medical insurance details for the previous year. Employers with 50 or more FTEs (known as Applicable Large Employers, or ALEs) must provide the health insurance described above or face penalties.

ALEs must file Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) and Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) with the IRS annually, no later than February 28 (March 31 if filed electronically) of the year immediately following the calendar year to which the return relates. ALEs must also furnish a statement to each full-time employee, which includes the same information provided to the IRS, by January 31 of the year immediately following the calendar year to which the information relates.

What is the future of the ACA with the new administration of 2017?

The ACA is facing what could be a ‘repeal and replace’ process that may make some material changes to the law, or could completely eliminate many elements of the ACA.  As of March 2017, no changes have been made and it is GPA’s understanding that the law and all elements related to the mandates, both individual and employer related, will continue to be in place throughout 2017.  The need for documentation and reporting as required by the ACA will continue until a notification released by the IRS states otherwise.

How can GPA assist you in keeping compliant with ERISA and the ACA?

Located in Southern California, we work with businesses from Orange County and Los Angeles, to San Diego, San Bernardino and Riverside Counties to offer compliance services. Our compliance specialists will review and assess what steps you need to take in order to become compliant and avoid penalties. To speak with our team of benefit or compliance specialists, contact us today at 1-877-559-9922 or email our team at