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Some Not-So-Trivial ERISA Trivia
Q: When must an employer comply with 2014 PPACA requirements, such as dropping the preexisting condition exclusion, limiting the waiting period to 90 days, and covering clinical trials?

A: Some aspects of PPACA are unclear, many are complicated, and others may be difficult to comply with for reasons beyond your control.

The 2014 PPACA requirements generally apply for plan years beginning on or after January 1, 2014. But, does that mean the plan's renewal date, or does it mean the ERISA Plan Year? Those dates are often different - especially with wrap plans that encompass component benefit plans with different anniversaries.

From a legal perspective, the ERISA Plan Year is designated in the Plan Document. It is often a calendar year (January 1 to December 31), but it can be any twelve-month period chosen by the Plan Administrator (for example, May 1- April 30), and this is the time frame for which an employer reports information to the Department of Labor on Form 5500.

Most insurance companies are bringing their policies into compliance on the plan/policy renewal date occurring on or after January 1, 2014. That's when they amend an employer's health policies, certificates, and Summary Plan Descriptions to comply with PPACA. After all, carriers don't know if an employer has a formal ERISA Plan Document or what its ERISA Plan Year is. Furthermore, it's not the carrier's responsibility to make sure the employer complies. Compliance is solely the employer's duty, and the employer is liable for noncompliance.

Some factors beyond your control are that the carriers' systems may not be flexible enough, or that the carriers may just not be willing to accommodate an off-anniversary benefit change. Self-insured / Administrative Services Only plans have more flexibility in making mid-year plan design changes, but fully insured policies may be problematic. Lastly, you may find that some carriers and their reps simply don't understand ERISA.

Consider this hypothetical problem. An employer currently has an insurance (or self-insured) plan that has a preexisting condition exclusion and six month waiting period. The plan renews on 10/1/14, at which time the carrier will automatically update it to comply with PPACA.

If an employee with no prior creditable coverage was hired on 1/15/2014, and he is hospitalized on 6/1/2014, the claim would normally be denied because the employee is still considered to be in the waiting period or because the condition was preexisting.

However, if the employer also has an ERISA plan that renews on 5/1/2014, the employee may file a lawsuit claiming that the employer should pay for his medical expenses because it neglected to update its health plan to comply with PPACA on its ERISA renewal date, in which case the claim would have been covered.

This situation is a real possibility. Advisers should make their employer clients aware of this pitfall, and they should also discuss it with the relevant carriers.

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© 2017 ERISAPros, LLC, All rights reserved. Information on ERISAPros' website, its newsletter, “News & Views,” and its blog, “ERISA Wonk,” is published as a general informational source. Information and articles are general in nature and are not intended to constitute legal or tax advice in any particular matter. Blog posts and comments reflect the personal views of their respective authors - not those of ERISAPros. Transmission of this information does not create an attorney-client relationship. ERISAPros, LLC is not a law firm and is not giving legal or tax advice. It does not warrant and is not responsible for errors or omissions in the content on its website or in its newsletters. ERISA is a complicated and confusing law. Summary Plan Descriptions (SPDs), Wrap Plan Documents, and Form 5500s require review and updating by qualified ERISA compliance professionals.


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