While the timeline for health care reform calls for a phasing in of its key initiatives and compliance measures over several years, employers who provide health plan benefits—and particularly those who offer open enrollment during the fall—should already be prepared for three requirements set to take effect in the coming weeks and months. First, the $2,500 cap on health flexible spending accounts is effective for plan years which begin after December 31, 2012. Therefore, enrollments for calendar-year cafeteria plans will need to reflect this limitation.
Below is a brief summary of the other two compliance measures and deadlines. More detailed information about these and other health care reform initiatives, including videos from our recent “Health Care Reform + Supreme Court Ruling = Now What?” seminar, can be found here.
Summary of Benefits and Coverage
The Affordable Care Act requires that all plan participants and applicants be provided with a summary of benefits and coverage (SBC) that clearly and accurately describes the benefits and coverage (including cost-sharing provisions, exceptions to coverage, and coverage examples) provided under the plan. This information must be provided to applicants and enrollees before enrollment in a uniform format – not to exceed four double-sided pages in length – using easy-to-understand terminology.
- View sample Summary of Benefits and Coverage
- Download official template for Summary of Benefits and Coverage
What is the deadline for providing the SBC?
The law applies beginning with the first open enrollment period beginning on or after September 23, 2012. For calendar-year plans beginning January 1, 2013, SBCs will need to be provided to participants and their beneficiaries during the fall 2012 open enrollment period, which typically runs from October to December.
Who is responsible for providing the SBC?
If your company’s health plan is fully insured, the obligation to timely provide an SBC lies both with the plan administrator and your insurance company. If your plan is self-insured, the obligation lies solely with the plan administrator.
What is the penalty for not providing an SBC?
A penalty of up to $1,000 per failure can be assessed on plan administrators and insurers (for insured health plans) and plan administrators (for self-insured health plans) that “willfully fail” to timely provide the SBC.
If your company sponsors a calendar-year plan and you have not yet received or reviewed a copy of your health plan’s SBC, contact your plan administrator or insurer immediately.
Another new provision of the Affordable Care Act requires employers to report the aggregate cost of applicable employer-sponsored coverage on an employee’s Form W-2, beginning with 2012 Form W-2s issued in January 2013.
Who has to comply?
The law applies to private-sector employers, churches and other religious organizations, and most federal, state and local government entities. It specifically does not apply to employers who issued fewer than 250 W-2’s for 2011, church plans that are not subject to COBRA continuation of coverage requirements, or federally recognized Indian tribal governments or tribally chartered corporations owned by such tribes.
What has to be reported?
The new requirement applies only to “applicable employer-sponsored coverage,” which generally includes any employer-provided group health plan coverage under an insured or self-insured health plan that is excludable from the employee’s gross income under IRC §106, or that would be excludable if it were paid by the employer. The cost of coverage under a multiemployer plan is not required to be included.
What is the penalty for not reporting?
While the current guidance is unclear, it appears that the same information reporting penalties that apply for a failure to furnish a correct Form W-2 would apply to this requirement to report.
If your company sponsors a health plan or plans and you issued at least 250 W-2’s for 2011, you should be prepared for this new reporting requirement.
- Sample Summary of Benefits and Coverage
- Downloadable Template of Summary of Benefits and Coverage from the U.S. Department of Labor
- W-2 Reporting of Employer-Sponsored Health Coverage
- Seminar resources: “Health Care Reform + Supreme Court Ruling = Now What?”
- Seminar videos:
- Opening Session (Oklahoma City) — An overview and timeline of health care reform, featuring guest speaker Robyn Piper of Piper Jordan
- Opening Session (Tulsa) — An overview and timeline of health care reform, featuring guest panelist Todd Neaves of PremierSource
- Second Session — Featuring the mechanics of “Play or Pay,” waiting period restrictions and auto enrollment
- Third Session — Topics include medical loss ratios and rebates, Summary of Benefits and Coverage documentation, flexible spending arrangements, W-2 reporting, and PICORI fees
This law update has been provided for information purposes only. It does not provide legal advice, and it is not intended to create a lawyer-client relationship. Readers should not act upon the information in this law update without seeking professional counsel.
About the author
Jim Prince is an employee benefits/ERISA attorney with the McAfee & Taft law firm. He has extensive experience in representing clients, including employee benefit plans, in matters involving the Internal Revenue Service and the Department of Labor. He has also represented collectively bargained multiemployer plans subject to the Taft-Hartley Act.
Jim’s experience and expertise have earned him inclusion in The Best Lawyers in America and Oklahoma Super Lawyers. He is also an inactive certified public accountant and frequent speaker at seminars and conferences on employee benefit related topics.