Avoiding Compliance Mistakes During Open Enrollment

November27, 2018

Open enrollment is one of the busiest times of year for employee benefits professionals. It’s a stressful season that typically results in questions and complaints, and comes with a high potential for both employer and employee mistakes.

Employee attention to employer communications during open enrollment is often high and accuracy is crucial. Well-written and timely notices can satisfy many compliance obligations. Inaccurate or incomplete open enrollment materials can create employee confusion and result in legal liability under the complex network of federal laws governing employer-sponsored benefit programs. Consider these key issues to avoid open enrollment compliance missteps:

Plan design changes

If you change your plan design (e.g., adding a HDHP option and a health savings account), carefully review all language describing the changes and consider how it will impact other coverage. Precise and clear communication will help prevent future benefit claims and litigation. Consult a trusted advisor and/or legal counsel if any plan design changes will require plan amendments and/or updated summary plan descriptions.

Voluntary benefits

If you offer voluntary benefits intended to be exempt from ERISA, pay close attention to how these benefits are described and endorsed and what administrative tasks you are performing. An error could trip the voluntary plan safe harbor and subject these plans to ERISA, COBRA, HIPAA and other compliance mandates.

Open enrollment communication

It’s critical that employers communicate clearly to employees about their opportunity to enroll in coverage. Carefully check all open enrollment materials for inconsistent descriptions and dates across different communications and lack of clarity around which benefits require annual election. Avoid language promising future benefits. Include legal notices and disclaimers when necessary (e.g., wellness plan notice of reasonable alternative standard). Consider including a reservation of rights clause describing the employer’s right to amend and/or terminate the plan or any benefit offerings at any time.

Eligible groups

Review your open enrollment distribution list to ensure that materials are provided to all eligible individuals, including non-active employees (e.g., COBRA-qualified beneficiaries and alternate recipients under a Qualified Medical Child Support Order). Make sure your enrollment opportunities are accessible to all who are eligible and distributed on platforms that all can engage with and understand.

Annual legal notices

Many notices are required on an annual basis, such as the HIPAA Notice of Special Enrollment Rights and Children’s Health Insurance Program (CHIP) Notice. Confirm that all required annual legal notices are included and properly distributed. While it may be easier and less expensive to issue electronic notices to employees, the law imposes specific requirements for electronic disclosure. The general rule for disclosure of ERISA documents is that they must be furnished in a manner reasonably calculated to ensure actual receipt of the document by the intended recipient. For some notices, delivery to the employee is treated as delivery to his or her entire household, but certain others must be separately provided to dependents. For notices that have to be provided separately to dependents, electronic delivery may not be an option.

Health reform information reporting

Confirm that your enrollment vendor provides records of employees who waived and enrolled in group medical benefits. This data is crucial when tracking offers of coverage and filing Forms 1094 and 1095 to satisfy health reform’s information reporting requirements. Also check with your information reporting vendor to ensure compliance with filings for the upcoming spring. Review systems now to ensure you are capturing the necessary information to be reported to the Internal Revenue Service for all participant groups. Consult correspondence you received from the IRS regarding prior year reporting and confirm that any noted issues have been addressed.

Privacy protections

Enrollment data is often protected health information (PHI) under HIPAA. Confirm that a business associate agreement (BAA) is in place with all vendors that handle PHI. Verify that PHI enrollment data is not shared outside of the plan (even with colleagues) in a way that could conflict with HIPAA mandates.

Despite the stress and potential for problems, open enrollment provides an opportunity for a company to set itself up for success for the following year. Companies of all sizes must ensure that their organizations are mitigating risks and staying compliant during open enrollment season. Doing so will help prevent legal fees and costly fines that could potentially affect an organization for years to come.