How New Laws, Regulations Affect Compensation and Benefits Plans

In today’s soft labor market, compensation and benefits might seem like a non-issue. But as small business hiring inches upward and the competition for talent heats up, rewards strategies have taken on renewed significance for human resources and financial professionals.
Adding to their punch list are sweeping legislative and regulatory changes that demand a clear understanding of new healthcare and pension plan administration mandates, tax credits, nondiscrimination, reporting, and filing requirements, and a host of other developments.
CBIA’s 2011 Compensation & Benefits Conference, held March 24 in Cromwell, featured three morning plenary sessions and nine in-depth breakouts on compensation issues and employer-sponsored medical, wellness, and pension plans. More than a dozen legal, accounting, and public policy experts shared insights and information about the phase-in of new government rules, the shifting political landscape, changing employee demographics, and the impact these and other variables will have on a macro level and on day-to-day business operations.
The Politics of Healthcare Reform
A major topic at the conference was the Patient Protection and Affordable Care Act (PPACA), or federal healthcare reform, enacted a year ago—almost to the day. Discussions centered on controversial aspects of the law, court challenges and appeals, key compliance issues, penalties, and anticipated timelines.  
Jason Martiesian, vice president of state government affairs for UnitedHealth Group [pictured above at the conference]. acknowledged lingering and widespread uncertainty about healthcare reform, which public opinion polls consistently show is the second-biggest concern for voters looking ahead to the 2012 elections, right behind jobs and the economy.
Though last November’s midterm election results—a Republican-controlled House and Democrat-controlled Senate—are sure to have an influence, Martiesian indicated that it’s too early to tell exactly what the fed’s role will be in delivering employer-based health coverage. Meanwhile, numerous cases challenging or upholding the constitutionality of federal healthcare reform, most notably actions filed in Florida’s U.S. District Court, illustrate how the debate is playing out at the state level.
States are also pushing forward with their own healthcare reform, as evidenced by the implementation of healthcare exchanges, innovative payment structures, incentives for preventive medicine and care coordination, and premium rate review.
Lynn Sorrentino, CBIA’s vice president of insurance marketing, gave an overview of some of Connecticut’s own hotly contested healthcare reform efforts, namely, proposals to establish a state-run healthcare exchange, pooling, new coverage mandates (14 of these have already passed through the Insurance Committee in this legislative session), and SustiNet, a proposal that would have the state compete as a health insurer against the private market in a way that would put the taxpayer-funded general fund at significant risk.
Beyond PPACA
Employers’ legal and fiduciary obligations with regard to group health plans extend far beyond PPACA. They are, in fact, governed by a virtual alphabet soup of state and federal laws and regulations. 
Bruce Barth and Melanie Hancock, partners at Robinson & Cole, provided a detailed review of recent and upcoming rules, penalties, and tax provisions related to employee medical coverage and wellness plans. Topics included

• Changes to the HIPAA privacy rules
• Coverage guidance related to mental health parity and addiction equity
• Special enrollment rights for employees and dependents under Medicaid and the State Children’s Health Insurance Program (SCHIP)
• Protection for members of the military under the USERRA and HEART acts
• Temporary subsidies and notice requirements for the Consolidated Omnibus Reconciliation Act of 1985 (COBRA)
• Extension of Connecticut’s continuation coverage (mini-COBRA) to a period of up to 30 months
• Coverage for dependent college students under Michelle’s Law
• Summary plan descriptions that include the minimum hospital stay for newborns and mothers under NMHPA
• The impact of the Genetic Information Nondiscrimination Act of 2008 (GINA) on  employer-sponsored wellness programs and health risk assessments
• Furnishing a notice of covered treatment under the Women’s Health and Cancer Rights Act upon employee enrollment in healthcare plans (and annually thereafter)
• Section 125 cafeteria plans under Connecticut and federal law
• Fiduciary and administrative obligations imposed by the Employee Retirement Income Security Act of 1974 (ERISA)
• Privacy and security provisions under the HITECH Act
• The potential impact of various federal laws on healthcare plan design and administration, including the Family and Medical Leave Act (FMLA);  Medicare mandatory reporting, secondary payer, and Part D requirements; age discrimination and pregnancy discrimination; Americans with Disabilities Act (ADA), HMO Act, and TRICARE requirements

Many of the changes discussed require employers to not only review their plan documents, administrative policies, and procedures for compliance, said Barth, but also retrain their HR personnel and issue new employee communications.
To add to the complexity, some provisions apply to certain plans (e.g., insured) but not others (e.g, self-insured), as is the case with Connecticut’s law on same-sex marriage. Many are preempted by federal laws, such as ERISA, or include grandfathering plans. Some apply only to organizations of a certain type or size, exempting all others.
 In short, there are at least as many exceptions and preemptions as there are rules.
What’s more, the learning curve can be steep, and mistakes are often costly. Missed filing deadlines, for example, can set companies back $100 per employee per day.
Not Just Healthcare…
Healthcare isn’t the only arena where Congress is making far-reaching changes. The U.S. Department of Labor,  in an effort to make fees more transparent to plan sponsors and participants, has instituted rules on how fees are disclosed for 401(k) and 403(b) plans, also known as defined contribution plans.
This is the DOL’s most significant step yet when it comes to fee transparency, said Richard Sych, president of Hooker & Holcombe, Inc. Changes to defined contribution plan disclosures, he noted, will have a substantial impact on employers.
Though the new regulations aim to make it easier for fiduciaries to determine the reasonableness of fees and spot potential conflicts of interest, their complexity—as with healthcare provisions—poses a considerable challenge for plan administrators. Sych offered tips to help administrators analyze their service-provider and participant-level fee disclosures and address schedule C changes.  He also advised plan sponsors to expect even greater participation in (and thus greater regulation of) defined contribution plans in the years ahead. — Lesia Winiarskyj
Related Product: Keep your company in compliance and in step with the competition with CBIA’s Benefits Survey Report (12th Edition). More >>
Related Event: For more on the latest developments in human resources, check out CBIA’s HR Conference on May 3.
Lesia Winiarskyj is a writer-editor for CBIA. She may be reached at lesia.winiarskyj@cbia.com.