Embed Size (px)
Citation preview
fisherphillips.com
The Government is Knocking:
IRS Penalty Assessment Letters &
DOL Audits of Health and Welfare Plans
Presented by:Tabatha George
Phone: (504) 529-3845Email: [email protected]
fisherphillips.com
AGENDA
•Overview of ACA Enforcement
― What triggers a Penalty Assessment Letter?
― What to do if you receive a Letter?
•DOL Audits of Health & Welfare Plans
― How to respond if your plan is audited
― What the DOL reviews in an audit
― Audit process and potential outcomes
• Tips for Being Audit Ready
fisherphillips.com
Back to the Basics
• The IRS is sending letters to employers indicating that they may owe penalties under the ACA’s employer shared responsibility (ESR) provisions
fisherphillips.com
Letter 226J, an “Initial Proposal”
• Letter 226J is a proposed penalty assessment letter that the IRS began sending in November of 2017
• An ALE may receive a Letter 226J if the IRS has reviewed your Form 1094/1095-C filings and determined that your company may owe money based on the information that you provided in the forms
fisherphillips.com
“Relief” and Other 2015 Specifics to Bear in Mind
• Conditional relief for mid-sized employers (50-99), but not for reporting
• Penalty A reduced by 80 employees instead of 30
• Penalties adjusted for inflation (Penalty A: $2080; B $3,120)
• “Good faith” reporting relief
fisherphillips.com
Why me?
• Reporting errors
• Failure to use safe harbor for affordability
• Confused employees
• Failure to provide adequate coverage1. Didn’t offer minimum essential coverage (MEC) to at least 70
% of full-time employees (and their dependents) and at least one of your full-time employees received a premium tax credit (or subsidy) on the Marketplace exchange; or
2. Offered MEC to at least 70 % of your full-time employees (and their dependents), but at least one of your full-time employees received a subsidy on the Marketplace exchange because the coverage was either unaffordable or didn’t provide minimum value
• Controlled group problem
fisherphillips.com
What If I Receive a Letter 226-J?
• Don’t ignore it • A response date is generally listed on the first page of
the letter (within 30 days from the date the letter was issued)
• Review the letter and attachments carefully (it includes detailed instructions)
• Don’t make a payment (at least not yet)• The Letter 226-J is a proposed penalty assessment
letter, not a notice and demand for payment
• Figure out why the IRS sent the letter, and if you disagree, gather backup info• Call your broker or legal counsel
• Call your CPA/vendor that assisted with your Form 1094/1095-C filings
fisherphillips.com
Responding to Letter 226J
• Detailed instructions on how to respond can be found in the letter and on the IRS Website
• You will respond in writing by either agreeing or disagreeing with the proposed ESR payment using a Form 14764 (included with initial Letter)
• If you disagree, then you must provide a full explanation of your disagreement using Form 14765 (consider including backup info)
fisherphillips.com
Responding to Letter 226J
• Extensions
• Reporting
• SBCs, pricing, waivers
• Affidavits
• Appeals
fisherphillips.com
IRS Letter 227
• After you file Form 14764 or Form 14765 (or both) the IRS responds by sending a Letter 227 to either close your case or explain next steps
• There are 5 types: 1) Letter 227-J - acknowledges receipt of response and that the penalty will be assessed. After
the IRS issues this letter, the case will be closed. No response required
2) Letter 227-K acknowledges receipt of the information provided and shows the penalty has been reduced to zero. After the IRS issues this letter, the case will be closed. No response required
3) Letter 227-L acknowledges receipt of the information provided and shows the penalty has been revised. Includes an updated Form 14765 and revised calculation table. Employer can agree or request a meeting with the manager and/or appeals
4) Letter 227-M acknowledges receipt of information provided and shows that the penalty did not change. Provides an updated Form 14765 and revised calculation table. Employer can agree or request a meeting with the manager and/or appeals
5) Letter 227-N acknowledges decision reached in appeals and shows the penalty based on the appeals review. After IRS issues this letter, the case will be closed. No response required
fisherphillips.com
IRS Letter 227
• Read your letter and attachments carefully. These documents explain the next steps available and provide information on how the case will be resolved
• If appropriate, complete response Form 14764 indicating your agreement or disagreement
• If you disagree with the proposed ESR payment, you must provide an explanation of why you disagree and/or indicate changes needed on Form 14765
• If you agree with the proposed ESR payment, follow the instructions to sign the response form and return it with full payment in the envelope provided
• Return all documents as instructed in the letter by the response date. If you do not respond to a Letter 226-J or Letter 227, the IRS will assess the payment amount against you by sending a payment demand (Notice CP220J)
• Keep a copy of the letter and any documents you submit
fisherphillips.com
IRS Letter 5699
• “Request for Employer Reporting of Offers of Health Insurance Coverage (Forms 1094-C and 1095-C)”
• Sent if the IRS believes that there is an incomplete or non-existent filing
• If the IRS rejected your filing, they consider it to be not sent until they have either accepted the filing with revisions or accepted it outright
• If you have not submitted your filing, the sooner the better to minimize penalties
• IRS requires one of the following responses within 30 days from the date of the letter:
• I was an ALE for calendar year 2015 and already filed Form 1094-C and Forms 1095-C with the IRS using <name> and <employer identification number> on <date>
• I was an ALE for calendar year 2015 and my Form 1094-C and Forms 1095-C are included with this letter
• I was an ALE for calendar year 2015 and will file my Form 1094-C and Forms 1095-C with the IRS using <name> and <employer identification number> by <date> (if more than 90 days from the letter, the response must explain why)
• I was not an ALE for calendar year 2015
• Other (must explain)
fisherphillips.com
Marketplace Notices
• “Marketplace Notices” come from Health Insurance Marketplaces, not the IRS
• The notice generally informs the employer that:
• An employee has been determined to be eligible for a subsidy and has enrolled in Marketplace coverage;
• The Employer is receiving the notice because it may have to pay an ESR penalty to the IRS; and
• The employer has the right to appeal the determination
• Employer may file an appeal to the Marketplace if it believes a mistake has been made about an employee’s eligibility for a subsidy
• Marketplace Notices do not necessarily lead to an IRS Letter 226J, and may serve as a potential 1st line of defense against wrongful ESR penalty assessments
• Only the IRS can determine if an employer owes an ESR penalty under Code Section 4980H, not the Marketplaces. However, a Marketplace appeal decided in an employer’s favor may cause the Marketplace to either
a) not report to the IRS that the employee received a subsidy or
b) reduce the period for which the employee is reported as being eligible for a subsidy
fisherphillips.com
What’s Next?
• “B” penalties
• 2016 penalties
• ACA reporting penalties
fisherphillips.com
WHAT TRIGGERS A PLAN AUDIT?
• Participant complaints
• Form 5500 reviews
• Media reports
• Private litigation
• Referrals from other agencies, advocacy groups or state insurance
• Random . . . . .
fisherphillips.com
DOL WELFARE PLAN AUDITS
FUN FACTS
• No safety in (small) numbers! Employers of any size who sponsor an ERISA welfare benefit plan can be audited by DOL
• Report published by the DOL in May of 2015 found that 39% of benefit plan audits (nearly 4 out of 10) contained major deficiencies
• Audits are increasing in scope and number
• Uptick in focus on MEWAs and AHPs
fisherphillips.com
DOL WELFARE PLAN AUDITS
• Includes broad range of investigative issues such as:
― Compliance with ERISA
― Unpaid or improperly processed benefit claims
― Excessive service provider fees
― Systemic denial of promised benefits
― Criminal misconduct by plan fiduciaries or medical providers
fisherphillips.com
• The DOL is responsible for enforcement of ERISA compliance ― 10 regional offices (CA, GA, IL, MA, MO, NY, OH, PA and TX)
• ERISA enforcement includes:
― Consolidated Omnibus Budget Reconciliation Act (COBRA)
― Health Insurance Portability and Accountability Act (HIPAA)
― Mental Health Parity Act (MHPA)
― Newborns’ and Mothers’ Health Protection Act (Newborn’s Act)
― Women’s Health and Cancer Rights Act (WHCRA)
― Title I of Genetic Information Nondiscrimination Act (GINA)
― Mental Health Parity and Addiction Equity Act (MHPAEA)
― Children’s Health Insurance Program Reauthorization Act (CHIPRA)
― Michelle’s Law
― Patient Protection and Affordable Care Act (ACA)
DOL WELFARE PLAN AUDITS
fisherphillips.com
• ERISA Enforcement includes broad range of investigative issues such as:
― Compliance with ERISA’s reporting and disclosure requirements
*ERISA has 2 basic requirements: 1) Written plan document; and 2) a compliant
SPD is provided to all plan participants.
― Compliance with ERISA’s protections for plan participants (e.g. claims procedures)
― Unpaid or improperly processed benefit claims
― Excessive service provider fees
― Systemic denial of promised benefits
― Misconduct by plan fiduciaries
DOL WELFARE PLAN AUDITS
fisherphillips.com
New 5500 Requirements for Health Plans• DOL, IRS, and PBGC released proposed revisions to the Form 5500 Annual Return required for certain ERISA-
covered employee benefit plans
• Small welfare plans would have to file truncated report for 2019
• Large welfare plans would have to file a new Schedule J, attesting under penalty of perjury that the plan is compliant with a number of federal laws, including:
• ERISA’s Summary Plan Description (SPD) requirement;
• ERISA’s Summaries of Material Modification (SMM) requirement;
• the Affordable Care Act;
• the ACA’s Summary of Benefits and Coverage (SBC) requirement;
• HIPAA portability and nondiscrimination;
• the Mental Health Parity Act and GINA;
• the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act ;
• the Newborns’ and Mothers' Health Protection Act;
• the Women’s Health and Cancer Rights Act; and
• Michelle’s Law
• Agencies hope that the new compliance questions will spark self-policing among plan sponsors and administrators, and encourage them to proactively evaluate whether they meet ERISA’s group health plan requirements
fisherphillips.com
HOW TO RESPOND TO AUDIT NOTICE
DON’T...
• Ask questions about what prompted the audit
• Volunteer documents or information that is not requested
• Ignore the notice
fisherphillips.com
HOW TO RESPOND TO AUDIT NOTICE
DO...
• Notify your legal counsel
• Contact the auditor immediately and establish a respectful and non-confrontational relationship
• Ask the auditor what the scope of the investigation will be
• Carefully inventory all records that will be made available to the auditor
• Meet with the appropriate management and staff of the company to familiarize them with the audit process
fisherphillips.com
HOW TO RESPOND TO AUDIT NOTICE
DO...
• Work with legal counsel to timely produce the requested documentation
• Provide documentation in a complete and organized fashion
• Be comprehensive – explain any missing information or documentation
• Identify any known compliance problems in advance
• Determine whether violations can be corrected before issuance of a Voluntary Compliance Notice Letter to avoid the 20% statutory penalty
fisherphillips.com
DOL WELFARE PLAN AUDITS
How does it work?
Step 1: DOL audit letter arrives in the mail with initial document requests (you may request additional time)
Step 2: Submission of relevant documents (coordinate with TPA/broker)
Step 3: Onsite review/audit (control your space or neutral location)
Step 4: Onsite interviews with fiduciaries and other persons with plan decision-making authorities (control access)
Step 5: EBSA identification of violations, or a closing letter if no violations are found.
Step 6: Voluntary Compliance Letter
Step 7: Correction Period
Step 8: Closing letter
fisherphillips.com
DOCUMENT PRODUCTION TO DOL
• No “one size fits all”
• Document requests may vary by auditor
• DOL may seek compliance information from TPA or insurer using subpoena power
• Record retention and organization is essential
• Key to ERISA compliance? • DOCUMENT, DOCUMENT,
DOCUMENT!!!!!
fisherphillips.com
ERISA DOCUMENT REQUEST INCLUDES . . . .
• Plan documents, Insurance policies and Riders
• Service provider agreements
• Summary Plan Descriptions (“SPDs”), Benefit Booklets, and/or Wrap Document including any amendments and/or riders showing changes in Plan benefits and entitlement to benefits for plan years beginning on or after March 23, 2010
• Signed copies of all Forms 5500 for the last 2-3 years including Schedules, auditors’ reports, and any other data to support Form 5500 entries
• Plan financial statements, cancelled checks, payroll records
• Trustee/corporate minutes
• Summary annual reports (“SARs”)
fisherphillips.com
ERISA DOCUMENT REQUEST INCLUDES . . . .
• If self-funded, all contracts for claims processing, administrative services and reinsurance, actuarial analysis showing feasibility of self-funding by employer
• Copies of all required notices, including lists and logs of issued notices and a description of procedures for distribution
• Participant records, provider agreements, and fiduciary bonds
• Employee handbooks discussing employee benefits
• New hire and open enrollment documentation including a Sample blank enrollment form given to participants and/or beneficiaries to complete for coverage
• Names, home address, phone numbers, email addresses and Social Security Numbers of all Plan Trustees, Plan Administrators and named fiduciaries
fisherphillips.com
HIPAA DOCUMENT REQUEST . . . .
• Under HIPAA
― Copy of the Plan’s rules for eligibility to enroll under the terms of the Plan (including eligibility)
― Copy of the special enrollment rights notice(s) provided to employees, including any lists or logs an administrator may keep of issued notices
― If the Plan is in a state with a CHIP or Medicaid program that provided for premium assistance for group health plan coverage, a copy of the Employer CHIP Notice provided to employees
― Material describing any wellness programs or disease management programs offered by the plan, including rewards based on a health factor and Notice of “reasonable alternative standards” (GINA compliance evaluated in wellness also)
fisherphillips.com
HIPAA DOCUMENT REQUEST....
• Under HIPAA Portability
― Copy of the Plan’s rules for eligibility to enroll under the terms of the Plan (including eligibility)
― Copy of the special enrollment rights notice(s) provided to employees, including any lists or logs an administrator may keep of issued notices
― If the Plan is in a state with a CHIP or Medicaid program that provided for premium assistance for group health plan coverage, a copy of the Employer CHIP Notice provided to employees
fisherphillips.com
ACA DOCUMENT REQUEST . . . .
• Under ACA (regardless of whether the plan is claiming grandfather status)― A sample written notice describing enrollment opportunities relating to dependent
coverage of children to age 26 if the Plan provides dependent coverage
― List of participants or beneficiaries whose coverage has been rescinded, reason for the rescission, and a copy of the written notice of rescission providing 30-days advance notice of any rescission of coverage
― Documents showing the limits applicable for each Plan year on or after September 23, 2010 if the Plan imposes a lifetime limit or has imposed a lifetime limit at any point since September 23, 2010
― Documents showing limits applicable each Plan year on or after September 23, 2010 if the Plan imposes an annual limit or has imposed an annual limit at any point since September 23, 2010.
fisherphillips.com
ACA DOCUMENT REQUEST . . . .
• Under ACA if the Plan is claiming or has claimed grandfathered health plan status within the meaning of Section 1251 of the Affordable Care Act
― Copy of the grandfathered health plan status disclosure statement that was required to be included in plan materials provided to participants and beneficiaries describing the benefits provided under the Plan
― Records necessary to verify, explain or clarify status as a grandfathered health plan which may include documents showing Plan terms in effect on March 23, 2010 , changes toward cost-sharing provisions, changes to contributions towards cost of coverage, and change in health insurance issuers since March 23, 2010
fisherphillips.com
MHPAEA DOCUMENT REQUEST . . . .
• Under MHPAEA, plan sponsors must ensure that any financial or treatment limitations on benefits under a group health plan are not more stringently applied to mental health and substance use disorder benefits than to medical/surgical benefits.
• How plan sponsors can gauge compliance
― Use plan-specific data when making compliance projections
― Review the plans’ nonquantitative treatment limitations (“NQTLs”)
• Not an objective standard – must analyze claims paid
fisherphillips.com
MHPAEA DOCUMENT REQUEST
• Examples of MHPAEA Violations
― Not offering out-of-network providers or inpatient benefits to treat mental health or substance use disorders
― Charging higher copays
― Use plan-specific data when making compliance projections
― Imposing broad preauthorization requirements on all mental health and substance use disorder treatments
― Use plan-specific data when making compliance projections
― Requiring written treatment plans for mental health services
fisherphillips.com
MHPAEA DOCUMENT REQUEST
• Under MHPAEA
― Documents relating to any analyses the Plan has done regarding testing the parity of the non-quantitative treatment limitations or the quantitative treatment limitations when compared to the medical/surgical limitations
― Breakdown of medical surgical claims paid showing the amount of medical surgical claims paid for each co-payment level applicable under the Plan for each plan year that the Plan covers mental health and/or substance abuse
fisherphillips.com
GINA DOCUMENT REQUEST
• Title I generally prohibits group health plans from:
• Adjusting premium or contributions amounts based on genetic information;
• Requesting/requiring genetic testing;
• Requesting/requiring/purchasing genetic information for underwriting purposes or in connection with open enrollment.
• No HRA during open enrollment or after if reward tied to premiums (considered underwriting)
• DOL does not audit EEOC wellness rules, but may refer violations
fisherphillips.com
OTHER DOCUMENT REQUESTS
• Under NMHPA
― Newborns’ Act: lists or logs of distributed notices
― Plan’s rules regarding pre-authorization for a hospital length of stay in connection with childbirth
• Under COBRA
― Sample notices, all election packages mailed, copies of elections, length of coverage and premium payment records
• Under WHCRA
― Sample notice and distribution logs
fisherphillips.com
ON-SITE AUDIT PROTOCOLS
• Determine who will be interviewed
― Familiar with plan documents and plan operation
― Prepared to address compliance issues and/or corrective measures
• Arrange to have legal counsel present
• Designate an appropriate location
― Provide comfortable, usable workspace
― Avoid high traffic areas
― Have all documents produced readily accessible
• Informal interview (not recorded or videotaped)
• DOL will ask series of questions until he has covered his agenda
fisherphillips.com
POSSIBLE AUDIT OUTCOMES
• No action – Closing Letter
― No ERISA violations found
― Violations cited, however, DOL does not deem the case fit for further action
― Violations cited, however no damages or de minimis damages
― Violations cited and corrected (following receipt of a Voluntary Compliance Letter)
• Corrective Measures Required
― Voluntary Compliance Letter issued
― 10 days to respond
― Proof of correction must be submitted
― Can take up to a couple months for processing
• Litigation
fisherphillips.com
TIPS FOR BEING AUDIT READY
Compliance
Compliance
Compliance
fisherphillips.com
TIPS FOR BEING “AUDIT READY”
• Identify an individual to coordinate compliance efforts
• Identify all group plans subject to compliance concerns
• Routinely conduct self-audits and correct failures
• Retain documentation and procedures that support compliance measures
• Maintain compliance documents in a central location
• Respond to participant questions and requests on a timely basis
• File Form 5500s timely and accurately (key trigger is a retirement plan with
over 100 participants and no welfare 5500)
• Distribute required participant notices timely and keep records of
distribution
fisherphillips.com
TIPS FOR BEING “AUDIT READY”
• Make timely updates to plan document and SPDs to reflect legal and design changes
• Confirm that vendors are following contract terms and administering plans in compliance with federal and other requirements
• Require vendors to immediately report instances of potential noncompliance to plan
• Train applicable staff on compliance obligations and procedures to address violations
• Work with legal counsel to minimize or correct any potential violations
• Respond promptly and thoroughly to any governmental inquiry related to health and welfare plans
fisherphillips.com
IMPORTANCE OF SELF-AUDITS
• Can demonstrate a good faith commitment to compliance if the plan is audited by the DOL
• Conducting self-audits grant employers a readiness to respond to participant information requests
• The goal of most self-audits is to identify and correct any compliance problems in advance
• Many available resources for self-auditing on DOL/EBSA website
• https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/health-plans
• https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/publications/cagappa.pdf
• https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/publications/rdguide.pdf
fisherphillips.com
What If I Am Not Compliant?
• Common errors include:• Failure to pay proper PCOR fees:
• Correct a previously filed Form 720 by filing a Form 720X, Amended Quarterly Federal Excise Tax Return; IRS penalties for failure to file a return or pay taxes may be applicable
• Failure to file a Form 5500:• Correct under the DOL’s Delinquent Filer
Voluntary Compliance (DFVC) Program
• Penalty will apply (generally capped at $1,500 per submission for “small plans” (< 100 participants) and $4,000 per submission for “large plans” (100+ participants))
• Filed a Form 5500 that is incomplete, incorrect, or otherwise deficient:• Correct by filing an amended 5500
fisherphillips.com
Final QuestionsEmail: [email protected]
Presented by:Tabatha George
Phone: (504) 529-3845Email: [email protected]
HRCI – ?
SHRM – ?
fisherphillips.com
Thank You
Presented by:Tabatha George
Phone: (504) 529-3845Email: [email protected]
