How to Distribute Group Health Plan Rebates to your Staff

October 7, 2020

Group health plan insurers are paying out $689 million in rebates to plan sponsors this year, as required by the Affordable Care Act’s “medical loss ratio” provision.

The provision requires insurance companies that cover individuals and small businesses to spend at least 80% of their premium income on health care claims and quality improvement, leaving the remaining 20% for administration, marketing and profit.

The MLR threshold is higher for large group insured plans, which must spend at least 85% of premium dollars on health care and quality improvement.

Employers who sponsor health small and large group health plans around the country in the last few months have received notices of rebates from their insurers. For those who have received one for the first time, there’s always a question of what they should do with the surprise funds.

MLR rebates are based on a three-year average, meaning that 2020 rebates are calculated using insurers’ financial data in 2017, 2018 and 2019.

You received a rebate…now what?

Health insurers may pay MLR rebates either in the form of a premium credit (for employers that are still using the insurer) or as a lump-sum payment. More than 90% of group plan rebates come as a lump-sum payment.

Once an employer receives this money, it is their responsibility to distribute the rebate to plan beneficiaries appropriately within 90 days, or risk triggering ERISA trust issues.

How the employer distributes the check will depend on how much their employees contribute to the plan, if at all. Here are the basic rules for employers handling their MLR rebate checks:

If you paid 100% of the premiums, the rebate is not a plan asset and you can retain the entire rebate amount and use it as you wish.
If the premiums were paid partly by you and partly by the participants, the percentage of the rebate equal to the percentage of the cost paid by participants must be distributed to the employees.

If you have to distribute funds to the plan participants, the Department of Labor provides a few options (if the plan document or policy does not already prescribe how they should be distributed):

The funds can be used to reduce your portion of the annual premium for the subsequent policy year for all staff who were covered by all of your group health plans.
The funds can be used to reduce your portion of the annual premium for the subsequent policy year for only those workers covered by the group health policy on which the rebate was based.
You can provide a cash refund to subscribers who were covered by the group health policy on which the rebate is based.

How it works (example)

Total premiums paid to an insurance company for a plan with 100 covered employees during 2019 = $2,000,000.
Total participant contributions during 2019 = $500,000 (25% of total plan premiums for the year).
The employer receives a $30,000 rebate from the carrier in 2020.
A total of $7,500 is considered plan assets and must be distributed to the employees (25% of the $30,000).

Tax treatment of cash refunds

If your employees paid for their share of the health premium with pre-tax earnings, the refund would also have to be taxed. But if they paid for their premiums post-tax, they would not be required to pay taxes on the refund (unless they deducted the premiums on their income tax returns).

You must distribute rebates to your staff within 90 days of receiving them.

Uncategorized

Employees Pick Perks and Benefits Over Pay Raises

by Inoventive Solutions

September 30, 2020

Great perks and incentives packages can help attract top-notch talent, maintain employee morale and improve overall engagement and satisfaction with a company.

The coronavirus pandemic has made perks and benefits even more important, particularly in light of so many workers feeling burned out, stressed from working at home or feeling isolated due to closures and shelter-at-home orders.

Recently, retailer Staples surveyed 1,549 employees across the U.S. about their preferences for work perks, asking them to rate how various benefits affected their motivation and if they preferred perks over higher salaries ―and which benefits were most important to them when looking for work.

One of the major perks that employees have coveted in past surveys is the ability to work from home. Well, the coronavirus pandemic has suddenly thrust many workers into that position. But what other benefits and perks do workers look for in an employer?

Perks defined

Employee benefits and perks are a non-wage supplement to salaries and include, among other things:

Lifestyle/entertainment perks, such as Netflix/Spotify subscriptions, free coffee and snacks at work, or employee discounts.
Continuing education perks, such as tuition reimbursement, student loan repayment, or financial support for receiving professional certifications.
Health and fitness benefits, such as gym membership reimbursements, on-site fitness facilities or nutrition classes.
Workplace flexibility perks, such as flexible hours, commuter benefits or the ability to work remotely on a regular basis.
Family-focused/childcare perks, such as daycare reimbursement or paid family leave.

What is the overall best way to improve employee morale?

Higher base salary (37% of respondents)
More workplace perks (22%)
Performance-based raises (21%)
Recognition from supervisors (9%)
Team-building initiatives (4%)
Requesting employee feedback (4%)
Spontaneous holidays (2%)

Must-have perks and benefits:

Flexible hours (40% of respondents)
Paid health insurance premiums (34%)
Paid family leave (29%)
Regular remote work (26%)
Financial assistance with professional certifications (26%)

Perks and benefits employees deem nice to have, but not essential:

Employee discounts (43% of respondents)
Free coffee and snacks (42%)
Streaming-TV subscriptions (42%)
Gym membership reimbursement (35%)
Onsite fitness classes (30%)
Company car, laptop or phone (30%)

The takeaway

If you are considering expanding your perks and benefits, to attract or retain staff or motivate workers, don’t forget the following before deciding:

Four out of five employees feel that workplace flexibility options are the most important employee perk category.
Perks that employees say are “must have” include flexible hours, paid insurance premiums, and paid family leave.

Because the Staples survey found that half of employees prefer higher salaries while the other half wants more perks, consider polling your workers before making a change.
62% of employees would accept a lower salary in exchange for better workplace perks.

Uncategorized

Group Plan Affordability Levels Set for 2021

by Inoventive Solutions

September 23, 2020

The IRS has announced the new affordability requirement test percentage that group health plans must comply with to conform to the Affordable Care Act.

Starting in 2021, the cost of self-only group plans offered to workers by employers that are required to comply with the ACA, must not exceed 9.83% of each employee’s household income.

Under the ACA, “applicable large employers (ALEs)” — that is, those with 50 or more full-time workers — are required to provide health insurance that covers 10 essential benefits and that must be considered “affordable,” meaning that the employee’s share of premiums may not exceed a certain level (currently set at 9.78%). The affordability threshold must apply to the least expensive plan that an employer offers its workers.

The threshold was increased because premiums for health coverage increased at a greater rate than national income growth during 2020.

With this in mind, if you are an ALE you should consult with us to ensure that you offer at least one plan with premium contribution levels that will satisfy the new threshold.

Failing to offer a plan that meets the affordability requirement to 95% of your full-time employees can trigger penalties of $4,060 (for 2021) per full-time employee, minus the first 30. The penalty is triggered for each employee that declines non-compliant coverage and receives subsidized coverage on a public health insurance exchange.

Since most employers don’t know their employees’ household incomes, they can use three ways to satisfy the requirement by ensuring that the premium outlay for the cheapest plan won’t exceed 9.83% of:

The employee’s W-2 wages, as reported in Box 1 (at the start of 2021).
The employee’s rate of pay, which is the hourly wage rate multiplied by 130 hours per month (at the start of 2021).
The individual federal poverty level, which is published by the Department of Health and Human Services in January of every year. If using this method, an employee’s premium contribution cannot be more than $104.52 per month.

Out-of-pocket maximums

The IRS also sets out-of-pocket maximum cost-sharing levels for every year. This limit covers plan deductibles, copayments and percentage-of-cost co-sharing payments. It does not cover premiums.

The new out-of-pocket limits for 2021 are as follows:

Self-only plans — $8,550, up from $8,150 in 2020.
Family plans — $17,100, up from $16,300 in 2020.
Health savings account-qualified self-only plans — $7,000, up from $6,900 in 2020.
HSA-qualified family plans — $14,000, up from $13,800 in 2020.

Uncategorized

More Employers Ask Workers to Sign COVID-19 Waivers, But They May Not Be Legal

by Inoventive Solutions

September 15, 2020

As lawsuits against employers continue rising amid the coronavirus pandemic, some businesses are requiring workers to sign waivers absolving them of liability and responsibility should they contract the virus.

Eight percent of executives surveyed by law firm Blank Rome said they would require that their workers sign waivers of liability before returning to the workplace.

While employers are trying to protect themselves from a liability that didn’t even exist a year ago, some human resources legal experts have expressed concerns that they may not be necessary ― and may be unenforceable.

The moves come as employers are wrestling with numerous risks that the pandemic has wrought, and with the U.S. Senate having proposed legislation that would limit the liability of employers for workers who become sick during the pandemic. A number of states have also enacted laws or emergency regulations that make it harder for employees to sue employers for negligence over COVID-19.

COVID-19-spurred employee lawsuits have mostly centered on employers not providing the proper protections for workers, discrimination or for being laid off for refusing to come to work.

Legal experts caution that employers cannot require workers to waive rights they may have, such as access to workers’ compensation benefits or the right to file a complaint with OSHA.

They also say that some employers may consider waivers as a green light to not take precautions against COVID-19, but in such cases the waivers would likely not be legal.

If a worker claims they caught COVID-19 at work and the facts back that up, they would likely have access to workers’ compensation benefits (some states even require it). But if the employer was negligent, the employee could have further legal avenues to pursue besides workers’ compensation, rights that cannot legally be waived, lawyers say.

So even if an employee were to sign a document waiving their right to file a complaint if they feel their employer is being negligent, they may still have recourse.

Requiring workers to sign waivers could present a number of legal issues, according to the law website nolo.com, including:

Courts in some states are reluctant to enforce liability waivers in the workplace because of the superior bargaining power of employers over their staff.
Workplace morale could suffer if your employees think you are placing your own economic interests above workplace safety.
Any waiver employees sign would not protect your firm from lawsuits filed by their families should they contract COVID-19 if staff are infected at work.
A waiver might be unnecessary in states that have passed laws granting immunity to employers for claims made by workers infected with the virus.

Another option

While employees who refuse to sign a waiver of their company’s liability may have grounds to challenge their employer, some liability lawyers say that employers instead of a waiver can ask their staff to sign a social contract that requires:

The employer to follow Centers for Disease Control and Prevention guidelines and take all necessary precautions to prevent the spread of COVID-19 at work, and
The workers to comply with their employer’s requirements on mandates on wearing masks, social distancing and not coming to work if they have symptoms or of they think they have been exposed to someone with COVID-19.

This type of agreement won’t protect an employer from a lawsuit, but it does spell out that they are following authorities’ recommendation for protecting employees.

While employees who refuse to sign a waiver of their company’s liability could have grounds to sue, those who sign this type of acknowledgement of new workplace rules and government guidance are less likely to be successful if they are fired for not signing. This is because the acknowledgement is not forcing them to give up any of their rights and is rather for their and their co-workers’ protection.

These social contracts also would provide workers with a list of their responsibilities when working during the COVID-19 pandemic, and outline what their employer is doing to protect them.

Uncategorized

Preparing for Open Enrollment During the Pandemic

by Inoventive Solutions

August 26, 2020

With the coronavirus showing no signs of slowing, health insurance is likely top of mind for your employees. Many of them will be anxious and it’s likely that they will be more engaged and interested in understanding whether their current coverage is sufficient should they be stricken by the virus.

Not only that, but due to social distancing and with many employees working remotely, employers will need to adjust their open enrollment procedures to make sure they are safe, efficient and a success for both them and their employees.

This year in particular, it’s important that you use a multi-pronged approach that keeps everyone informed and safe.

Comprehensive and simple communications

When you are informing your staff about their benefits and open enrollment procedures, make sure you keep things simple. Don’t delve into too many details that are likely to confuse them, but explain the bigger picture and direct them to other documents and information for the detail.

When explaining the benefits and procedures, don’t get bogged down in insurance jargon. Use everyday language, charts, graphs or infographics, checklists and other tools that make absorbing the information easier.

Use many communication media

Many workplaces are multi-generational and different generations prefer different modes of communication, particularly if you have employees who are working remotely due to the pandemic

To make sure you can reach all of your workforce, blast them information using a number of media. And follow up with phone calls to remote staff that don’t respond.

E-mails and e-mail newsletters

E-mails are an excellent way to communicate important information to employees, and to gather information on what they are opening, reading and forwarding.

You can inform them about open enrollment, provide them documentation on the plan offerings and inform them of upcoming web meetings and other important enrollment information.

Web meetings

Hold webinar meetings with videoconferencing to inform your staff about their benefit choices and what, if any, changes are being made to plans going into the new year.

You should focus on the main topics:

Any increases in health plan premiums,
Plan changes like deductibles, out-of-pocket maximums, copays, and more,
Network changes,
New offerings, and
Resources to help your workers choose the right plan.

There will likely be many queries about COVID-19 coverage, so be prepared to answer related questions.

During these web meetings, encourage your staff to ask questions and get answers. Record the meeting for employees that are unable to make it, so they can view it on their own time.

You should require all of your staff to either participate in the actual meeting or view the meeting. Set up a virtual sign-up for them to confirm they attended and received all the information.

Offer benefit support

Not everyone is going to be able to wrap their noodle around everything you went over during the web meeting. And plan documents can sometimes be daunting and confusing to someone who is not experienced in your system or is new to the workforce.

Additionally, some of your staff may have questions they are not comfortable asking during a group meeting and that would be more appropriately directed at a benefit counselor. This way, they can talk to someone who can guide them in choosing the right plan for them.

Don’t forget text messaging

Since most everyone has a smartphone on their person or nearby at all times these days, sending them text messages is a sure-fire way to get in front of them.

Use texting to notify staff about open enrollment dates, resources about their benefits, upcoming benefit meetings, contact resources, how to access the enrollment and benefit portal, and who to call for assistance.

Company intranet, enrollment portal

Post all of your open enrollment information on your company intranet if you have one, including links to the open enrollment portal. Every time you communicate with your staff, include the link to the open enrollment information.

This page should have all of your enrollment information, including start and end dates, links or pdfs of all plan benefit guides and plan summaries, contact information of key personal and benefit counselors, as well as all other resources they will need to choose their health plan.

The takeaway

By employing a mixture of all of the above strategies, you can conduct a safe and informative open enrollment that can help your staff choose their plan wisely and also feel comfortable about not catching COVID-19 during the process.

Uncategorized

A Primer on Changes to 2021 Group Health Plans

by Inoventive Solutions

August 18, 2020

While most business owners and executives have been fretting about the COVID-19 pandemic and the effects on the economy and the survival of their business, now is a good time to conduct a review of group health plans in light of changes and new rules for 2021.

Here are some of the main changes that you should consider ahead of the new year:

Out-of-pocket limits – The out-of-pocket limit amounts for 2021 are:

$8,550 for self-only coverage.
$17,100 for family coverage.

For HSA-compatible high-deductible health plans, the out-of-pocket limits for HDHPs with attached health savings accounts for 2021 are:

$$7,000 for self-only coverage
$14,000 for family coverage.

New preventative care recommendations

ACA-compliant health plans are required to cover preventative care services with no out-of-pocket costs, and new ones that become effective in 2020 and 2021 include:

Perinatal depression prevention.
HIV prevention pill for healthy people at risk.
Updated recommendation for prevention of BRCA 1 and 2-related cancer.
Updated recommendation for breast cancer: medication use to reduce risk.
Updated recommendation for hepatitis screening.
Updated recommendation for screening for unhealthy drug use in adults.

Flexible spending accounts

This year, the IRS issued a notice that increased the maximum allowable amount of unused funds at year end in FSAs that can be carried over to the next year.

The notice increases the maximum $500 carryover amount for 2020 or later years to an amount equal to 20% of the maximum health FSA salary reduction contribution for that plan year. That means the health FSA maximum carryover from a plan year starting in calendar year 2020 to a new plan year starting in calendar year 2021 is $550.

Additionally, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows employers to remove restrictions that funds in FSAs, health reimbursement accounts and HSAs cannot be used for over-the-counter medications. This is not a requirement that employers relax this rule for their FSA plans, but it allows them to choose to do so.

Summary of benefits and coverage

There are new Summary of Benefits and Coverage (SBC) materials and supporting documents that must be used for all plans that incept on or after Jan. 1, 2021.

Please remember that any changes to benefits in your group plan must be reflected in the SBC plan document and summary plan description.

The takeaway

2021 is fast approaching and with all the chaos of 2020, it would be wise to get a head start on understanding changes in store for the plans you offer. This would benefit both you and your employees.

Uncategorized

Insurers Don’t Have to Pay for Testing Returning Workers: HHS

by Inoventive Solutions

August 12, 2020

New guidance from the Trump administration absolves insurers of the responsibility of paying for COVID-19 tests that are required for workers who are returning to the job.

The guidance, released by the departments of Health and Human Services, Labor and Treasury, means that employers will likely either have to foot the bill themselves as they screen workers during the pandemic or pass those costs on to their workers. But in states that require employers to test workers, passing testing costs on to staff is usually not an option.

There had been some confusion about who would pay for the tests after the Families First Coronavirus Response Act required insurers to cover COVID-19 tests without patient cost-sharing. The new guidance has added a new caveat to that rule: that insurers cannot require health plan enrollees to pay for the test if it is deemed “medically appropriate” by a health care provider.

“Testing conducted to screen for general workplace health and safety (such as employee “return to work” programs), for public health surveillance for SARS-CoV-2, or for any other purpose not primarily intended for individualized diagnosis or treatment of COVID-19 or another health condition, is beyond the scope of section 6001 of the [Families First Coronavirus Response Act],” the guidance states.

Resistance from advocacy groups

The guidance was met with resistance from employer and consumer groups, with the advocacy group Families USA arguing that the nation’s workers should not be saddled with additional costs during these economically uncertain times.

Employers can require employees to be tested before returning to work, but the Pacific Business Group on Health said it would be highly unusual for a large employer to require testing for employees without paying for the tests in full.

Democrats have asked the administration to withdraw the guidance, but the White House has said it won’t and that it would like to see Congress come up with a solution in its next economic stimulus package for the coronavirus pandemic.

The HHS has said that states should use the $10.25 billion that lawmakers appropriated for testing to help pay for tests of returning workers.

Insurance companies may opt to pay for such tests anyway, as a precautionary measure. America’s Health Insurance Plans, however, is calling on more government support to cover the costs, which it says could be between $6 billion and $25 billion annually.

Uncategorized

What Insurers, Employers Expect in COVID-19 Aftermath

by Inoventive Solutions

August 6, 2020

A study has come out predicting that COVID-19, as devastating as it has been, will have little effect on 2021 group health plan rates, as well as offerings.

The study, by eHealth Inc., also found that many insurers have increased utilization of telemedicine and that many of them are extending benefits related to coronavirus testing and treatment.

Here are the main points of the study:

Waiving COVID-19 testing costs ― 97% of insurer respondents say they are waiving out-of-pocket costs for coronavirus testing.

Waiving treatment costs ― 58% of the insurers say they’re waiving out-of-pocket costs for COVID-19 treatment. Among insurers who say they have done this, 80% say they have waived all out-of-pocket costs, while 20% say they have waived only a portion of members’ out-of-pocket expenses.

Premium assistance ― 60% of carriers are letting enrollees financially affected by the coronavirus defer premium payments.

Few anticipate raising 2021 premiums due to coronavirus – 83% say they do not anticipate raising rates for 2021 in response to the crisis, while 17% anticipate raising rates no more than 5%. Eighty-seven percent of respondents offering Affordable Care Act plans say it is unlikely they will leave the ACA market due to the coronavirus.

More telemedicine services ― 96% of insurers say they are seeing increased demand for telemedicine services that include virtual doctor visits. Eighty-five percent think the crisis will drive increased demand for telemedicine benefits into the future.

Elective or non-emergency services spike – 80% of insurers expect a spike in these claims after the crisis is over. Seventy-three percent of those who anticipate this believe it will come within the next six to 12 months.

More use of mental health benefits – 33% of insurers surveyed say they have seen an increase in utilization of mental health benefits by members since the beginning of the coronavirus crisis.

Rate hikes, but more involvement

The Centers for Medicare and Medicaid Services has predicted that the country could spend $4 trillion on all forms of health care this year, which is 5.2% higher than in 2019.

Willis Towers Watson’s “COVID-19 Benefits Survey” estimates that due to COVID-19 testing and treatment, health insurance premiums could increase as much as 7% on top of the 5% increase employers previously projected for 2021.

At the same time, the survey found that despite facing unprecedented challenges and rapidly shifting business priorities due to COVID-19, many organizations are taking steps to protect the health and wellbeing of their employees. In particular, it found that:

Employers are focusing on promoting virtual medical care by raising awareness and reducing point-of-care costs.
Over 80% of employers have or are planning to offer expand access to virtual mental health services.
About two in five employers are planning to revise their 2021 health care strategy.
Nearly two-thirds of companies will prioritize access to mental health solutions in their 2021 health care program.
Employers are looking to communicate more on existing benefits.
Employers plan to enhance mental health services and stress management.
Companies are addressing benefits for employees on leave and furlough.

Uncategorized

Alternative Group Plan Funding Gets a Second Look

by Inoventive Solutions

July 28, 2020

Watching their group health plan premiums climb higher with each passing year, some employers start looking into alternative funding strategies in hopes they can get a better handle on their employees’ health costs.

While group plans are the standard, larger employers have typically had more options for funding their group health coverage. But now even small and medium-sized employers – even companies with fewer than 100 employees – can benefit from alternative funding approaches.

There are three main types of alternative funding strategies that are available to employers:

Captives
Private exchanges
Full and partial self-funding.

Captives

With a captive, multiple employers pool their resources and share the risk in providing health insurance to their employees. It is essentially a self-insured pool built into a captive insurance company (an insurer that is owned by the entity that created it). The captive has staff that will administer the health plan.

Captives are also multi-year agreements, so once an employer commits to make it worth their investment, they need to stick with it for a period of time.

Group captives will often have a specific funding mechanism that is broken down into four layers:

Layer 1: The employer is responsible for the first $25,000 of any claim made by one of its employees.

Layer 2: All employers involved in the captive will share the costs of that claim if it exceeds $25,000, up to $250,000.

Layer 3: For claims that cost more than $250,000, the captive will secure reinsurance coverage to cover amounts above that level. This reinsurance is also called “stop-loss” insurance.

Layer 4: Another layer of protection known as “aggregate stop-loss” coverage protects each employer in the captive for the total claims of their employees, ranging from 115% to 125% of expected claim costs in a year.

Private exchanges

Typically, businesses using a private exchange will offer employees a credit that can be applied toward the purchase of a health plan. Employees can then access a variety of health plans through an online portal and can chose and enroll in plans that meet their needs.

Private exchanges are run by insurance carriers or consultancies, and plans on the exchange are regulated as group coverage. Employees shopping on these exchanges are not eligible for the Affordable Care Act’s tax credits or cost-sharing subsidies.

Most employers currently using private exchanges are large; therefore, most private exchange plans are regulated as large-group coverage and are not part of the ACA’s single risk pool. However, to the extent that smaller employers participate in private exchanges, they are subject to the ACA’s small-group rating regulations and risk-pool requirements.

One of the main features of private exchanges is that they enable employees to comparison-shop among multiple health insurance plans.

Self-insuring

There are many different types of self-insurance, from minimum-premium or risk-sharing arrangements to a fully self-funded plan, in which the employer is responsible for all claims.

Employers can choose from:

Retrospective premium arrangements – The insurer will credit back a portion of the unused premium to the employer (typically as a credit for the following year). This is often used in a fully insured arrangement.

Minimum premium arrangements – The employer pays fixed costs (administration charges, stop-loss insurance and network access fees) and claim costs up to a maximum liability each month.

Partial self-funding -The employer takes on more liability and pays fixed costs (administration, network access, stop-loss premiums and some fees and taxes). It’s partial self-funding because the employer will purchase individual stop-loss insurance, which caps the employer’s liability on any given claim to a certain amount, say $50,000.

That way, the employer is self-insuring most of their employees’ medical needs, but is protected in case some of those claims become catastrophic.

Full self-funding – This is like partial self-funding except that there is no stop-loss insurance and the employer is responsible for all costs that are not shared by its employees. This kind of arrangement is usually only available to large employers.

The takeaway

These alternative funding approaches are what is available now. But the industry is innovating to making health care and insurance more affordable for all involved.

Uncategorized

Protecting Your Firm from Employee Benefit Lawsuits

by Inoventive Solutions

July 21, 2020

Employment practices and employee benefit-related lawsuits are on the rise – and employers have to be eternally vigilant when it comes to meeting their compliance obligations as plan sponsors.

Take the case of Visteon, a global automotive industry supplier, which outsourced its payroll and enrollment/disenrollment functions to outside plan administrators.

But because of internal mistakes at the firms that Visteon outsourced these noncore HR functions to, some of its former employees who should have received COBRA eligibility notices after leaving the firm never received them. At first it was just a handful, but ultimately 741 co-workers signed on to a class-action lawsuit

Visteon argued in court that it was not its own mistakes that had caused the error, and that it had made a good-faith effort to hire outside experts to take over this function for them. Payroll and enrollment, after all, are not core competencies for an auto parts supplier, the company said, and it had been relying on the expertise of these other payroll companies to properly execute these functions and provide these notices.

The court didn’t buy Visteon’s argument. Rather, it held the company responsible in 2013 for poor internal tracking systems, negligence in overseeing its third party administrators, and failure to accept responsibility for its COBRA notification efforts.

That exposed them to the statutory penalty of $110 per worker per day for failure to provide notification.

In the end, for doing what tens of thousands of employers are doing nationwide – relying on third party administrators to handle payroll functions that are regulated under COBRA – Visteon was slapped with $1.8 million in penalties.

Employers are frequent lawsuit targets

As much as companies rely on their employees to generate profits, simply having them around and administering their benefit plans potentially exposes employers to significant possible liability.

According to a survey from insurer CNA, employment-related disputes are the fastest-growing category of civil lawsuits in America.

Employers face risk from the potential of lawsuits employees may bring for alleged failure to fulfill their fiduciary duties as sponsors of retirement plans under ERISA, for example, or for accidental or unauthorized leaks of personally identifiable information, which carries significant penalties under HIPAA.

Sponsors of defined contribution pension plans, such as 401(k)s, are particularly frequent targets of lawsuits for various fiduciary failures, errors or omissions.

Protecting your firm from legal action

So how can employers protect themselves against the potential costs of employee benefit-related litigation? You should:

Carefully monitor your plan third party administrators. Insist that they document their own compliance practices to you. Don’t take their word for it.
Reconcile your own lists of recently departed employees with your payroll company’s COBRA notifications.
Understand that your commercial general liability insurance policy usually will not cover you against liability arising from improper administration of employee benefit plans, ERISA, COBRA, USERRA, wage and hour laws, Title VII related lawsuits, and the like.
Consider employment practices liability insurance. This coverage will often protect against lawsuits like this and cover legal expenses, and even judgments.
Conduct regular reviews with advisers of investments in pension and 401(k) plans. Investments should be reviewed at least annually – and quarterly is not unusual.
Ensure that fees paid to 401(k) and other plan administrators are not excessive. You don’t have to go with the cheapest provider (that can be trouble, too). But if you do choose a higher-fee vendor, document why you made that decision so that you can show your reasoning in court and defend your decision-making as sound and prudent.
Invest in data security and HR compliance expertise.